Tesla Motors Inc (TSLA) Shares Close Up In Deal To Acquire Small Michigan Parts Manufacturer

Tesla Motors stock jumped nearly 3 percent a day after the Silicon Valley electric car maker issued a “net positive” first-quarter earnings report in which it maintained its 2015 target of delivering about 55,000 vehicles to customers, up from 31,655 last year. Tesla shares rose 2.76 percent, or $6.37, to close at $236.80 on Thursday.

Investors digested news reported late Wednesday by the Detroit Free Press that Tesla Motors reached a deal to acquire Riviera Tool LLC (OTCMKTS:RIVT), a small penny-stock listed metal-stamping facility based in Grand Rapids, Michigan. The newspaper said the company would become Tesla Tool & Die. This is the first acquisition of another company for Tesla and its first foray into the Detroit 3’s Michigan stronghold. The price of the deal has not been disclosed.

Tesla Motors Inc. (Nasdaq:TSLA) shares started the day down nearly 3 percent from the previous day’s close after Morgan Stanley said the company was burning through cash at an “eye-watering rate” and that the company would exhaust its current $1.5 billion cash pile in about three quarters without more money.

A spokeswoman for Riviera Tool wouldn’t comment on the deal Thursday afternoon but referred all inquiries to Tesla Motors. Riviera makes die systems for rapid production of automobile structural components, such as hoods, doors, roofs, fenders and bumpers.

Tesla appears to be taking a cue from Silicon Valley tech companies that acquire small firms to become exclusive components suppliers. The maker of the Model S luxury electric car must secure a reliable stream of parts to support its ambitious growth plan, which includes ramping up production of the Model X SUV beginning in the third quarter in order to double automotive production by the fourth quarter, if not sooner.

“There are a lot of execution risks coming in the second half of the year,” said Theodore O’Neill, senior research consultant of Ascendiant Capital Markets. “Sixty percent of their production this year is going to take place in the second half, with a lot of that happening in the fourth quarter. If one screw doesn’t show up in time, they could miss their [production and delivery] targets.”

Tesla is under immense pressure to meet production, delivery and revenue-growth benchmarks, because it’s not expected to turn a profit until after 2020. In a shareholder letter issued Wednesday, CEO Elon Musk and Chief Financial Officer Deepak Ahuja said their company made 11,160 cars in the first quarter, and delivered 10,045 Model S cars to customers in the three months ending March 31.

In the current quarter, Tesla is aiming to produce 12,500 vehicles and deliver between 10,000 and 11,000 cars to customers. This means in order to reach the “approximately 55,000” deliveries in 2014, it would need to sell about 17,000 cars per quarter in the last half of the year.

Tesla wants to double vehicle production, from about 1,000 cars a week to 2,000 toward the end of the year. Model X deliveries to customers are scheduled to begin sometime in the third quarter. Musk said in a conference call late Wednesday customers that have ordered the Model X will be able to configure the vehicles online this summer.