What happened

Shares of electric-car company Tesla (NASDAQ:TSLA) were slammed on Monday, following a report from The Wall Street Journal over the weekend stating the automaker had asked suppliers for price reductions on contracts to support its efforts to become profitable as it ramps up Model 3 production. Even more troubling, one of Tesla's global suppliers told WSJ that Tesla is asking for retroactive discounts on payments the company has made to the supplier since 2016.

Shares fell as much as 6.6% on Monday. At the time of this writing, the stock is down 5%.

Model 3 interior and 15-inch touch display

Model 3. Image source: Tesla.

So what

Tesla's bid to boost profitability and pad its cash reserves with supplier discounts and some retroactive payments that would require supplier refunds comes as the company's cash balance is falling quickly. At the end of Tesla's first quarter, the company had $2.7 billion of cash, down from $3.4 billion at the end of its previous quarter.

"[Tesla] confirmed it is seeking price reductions from suppliers for projects, some of which date back to 2016, and some of which haven't been completed," wrote the Journal.

Now what

Efforts to negotiate with suppliers for retroactive discounts show how eager the automaker is to become profitable. Other initiatives Tesla has undertaken in its quest for profitability include cutting its workforce by about 9% this spring and a focus on selling as many high-end versions of its Model 3 as possible before it brings its base model to market.

Tesla is aiming to make it through the year without raising any capital. But with negative free cash flow of over $1 billion in Q1 and with Q2 expected to feature another big loss and negative free cash flow, the automaker appears to be cutting it close.

Daniel Sparks owns shares of Tesla. The Motley Fool owns shares of and recommends Tesla. The Motley Fool has a disclosure policy.