Tesla Slashing Up to 9% of Workforce

Up to 3,000 likely to lose jobs, but assembly, battery-plant workers expected to be spared.

by on Jun.12, 2018

Tesla CEO Elon Musk told employees that the company would lay off 9% of the workforce in a letter.

Tesla will lay off as many as 3,000 workers, or nearly 9% of its workforce, in a bid to reorganize and address endemic problems, according to a letter sent by CEO Elon Musk to company employees.

The first layoffs reportedly were set to take effect this week, according to website Electrek, which obtained a copy of the letter. The automaker subsequently confirmed that the layoffs will take place, but emphasized that production workers will be spared, the cuts targeting the salaried side of a workforce that grew to around 30,000 after last year’s acquisition of Solar City.

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If anything, Tesla has been trying to expand the workforce at both its Fremont, California assembly plant and Reno, Nevada Gigafactory in an effort to finally put production of the critical Model 3 battery-sedan on track. Musk recently said Tesla is on track to roll out about 5,000 of the vehicles a week by the end of this month, a roughly 250% increase from the end of the first quarter – though still well below its original target.

“To ensure that Tesla is well prepared for the future, we have been undertaking a thorough reorganization of our company,” CEO Musk said in a letter to Tesla employees sent last month following the announcement of the planned reorganizaton. “As part of the reorg, we are flattening the management structure to improve communication, combining functions where sensible and trimming activities that are not vital to the success of our mission.”

The EV maker plans to cut 9% of its employees, although Musk said the company is still looking for certain employees.

(Despite concerns, safety probes, Musk promises “full self-driving” Autopilot by August. Click Here for more.)

Perhaps to send the message that Tesla isn’t in retreat after a dreadful first quarter, Musk wrote in his letter to employees that the automaker “will still continue to hire outstanding talent in critical roles.” He also told “those who are departing, thank you for everything you’ve done for Tesla and we wish you well in your future opportunities.”

The news of a major job cut quickly short-circuited a rally in Tesla stock first ignited by Musk’s tweet on Model 3 production. He added momentum late Monday with a tweet announcing plans to launch a software update in August that will give Tesla vehicles “full self-driving capabilities.”

He did not explain whether that would mean complete hands-free operation or something more limited, but the reaction was immediately positive among many analysts, investors and owners. There has been some concern among those who fault Autopilot for playing at least a partial role in several recent crashes. Those concerns were underscored by a preliminary report from the National Transportation Safety Board that indicated the vehicle appeared to accelerate in the seconds before the crash.

(Click Here for details about 1 of every 4 Model 3 orders being cancelled.)

Tesla will not be cutting employees at its Gigafactory near Reno, Nevada.

When Tesla first signaled a plan to reorganize last month, the company indicated it wanted to flatten the organization, at least in part, to address the sort of problems that have routinely resulted in delays in its product programs. The Model X SUV, for example, came to market two years late and suffering from serious issues that resulted in Consumer Reports declaring it the worst vehicle on the market based on quality and reliability.

The influential magazine initially declined to endorse the Model 3, as well, only giving it a Recommended Buy rating after the carmaker this month fixed issues with the sedan’s brakes. But Tesla has yet to address a more serious problem: the slow pace of Model 3 production. It originally hoped to produce 400,000 of the mainstream-priced vehicle this year but, as of the end of the first quarter it was producing barely 2,000 a week.

That led the company to report record losses for the first quarter of 2018. The ever-positive Musk, however, promised a major improvement in the company’s fortunes for the coming months, declaring Tesla would be both profitable and cash-flow positive for the second half of the year. The job cuts are, if anything, just the latest steps Tesla has taken to rein in spending, according to Sam Abuelsamid, an analyst with Navigant Research who has long followed the company.

(Tesla CEO Musk survives first big challenge as CEO. For the details, Click Here.)

Among other things, it last year began delaying payments to suppliers and slashing other expenses. “Frankly, I’m not surprised” by the latest news, Abuelsamid told TheDetroitBureau.com. “He’s made some big promises…and I expect he will have to take even more steps to cut costs.”

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3 Responses to “Tesla Slashing Up to 9% of Workforce”

  1. Allen says:

    Just some thoughts:

    “… to improve communication…” This from someone who tells reporters to stop asking questions.

    “… “full self-driving capabilities.” He did not explain whether that would mean complete hands-free operation…” Doesn’t …“full self-driving capabilities…” automatically mean hands-free operation?

    “…delaying payments to suppliers…” Isn’t this supposed to have an effect on credit rating?

    • Paul A. Eisenstein says:

      Yes, yes, and yes, Allen…unless you’re Elon Musk and the company is Tesla, it appears.

      Paul E.

  2. Glenn says:

    I am increasingly getting a feeling that Tesla is trying to ward off a cash crunch.