Cutbacks to hit 9% of Tesla’s workforce
Automaker Tesla will cut about 9 percent of its workforce as part of a previously announced reorganization but won’t eliminate jobs on the Fremont factory floor, CEO Elon Musk told employees Tuesday.
The cuts, Musk wrote in an email to employees, will come “almost entirely” from salaried positions and will not include any production associates at the factory, where Tesla is struggling to ramp up production of its latest electric car, the Model 3. Indeed, Tesla still has “a significant need” for more factory personnel, he wrote.
But years of rapid growth, he said, had left Tesla with some jobs that were duplicative or hard to justify. Last month, Musk announced a companywide reorganization designed to flatten Tesla’s management structure, improve decisionmaking and help the builder of luxury electric cars achieve sustained profitability.
Palo Alto’s Tesla has recorded just two profitable quarters in eight years as a publicly traded company. Tesla predicted last month that it would achieve profitability in this year’s third and fourth quarters. The company has burned through so much cash increasing Model 3 production and building out its Nevada battery Gigafactory that many Wall Street analysts argue that the company will need to raise more money this year, a move that Musk insists won’t be necessary.
Musk wrote in the email, which he posted on
Twitter, that the company would continue to fill key positions as necessary, including hiring more production personnel. The company plans to reach a long-delayed milestone of building 5,000 Model 3 sedans per week by the end of this month.
“I also want to emphasize that we are making this hard decision now so that we never have to do this again,” Musk wrote.
Tesla employed 37,543 people at the end of 2017, according to its most recent annual report, with nearly 10,000 employees at the factory. Since then, head count has grown roughly 15 percent, according to the company. So the cuts will still leave Tesla with more employees than it had at the start of this year.
“Nine percent of the workforce is a pretty good-sized number, but as they’ve been ramping up for the Model 3, as well as maintaining sales of the Model S and Model X, it is expected that payroll may be bloated,” said Rebecca Lindland, executive analyst for the Kelley Blue Book auto information service. “This is an attempt to cut costs and contain expenses.”
As part of the restructuring, the company will no longer station some of its solar salespeople in Home Depot stores — a holdover from SolarCity, which Tesla bought in 2016. The majority of those employees, Musk said Tuesday, would be offered positions in Tesla stores.
“To those who are departing, thank you for everything you’ve done for Tesla and we wish you well in your future opportunities,” Musk wrote in his email. “To those remaining, I would like to thank you in advance for the difficult job that remains ahead.”
Tesla shares closed at $342.77, up 3 percent. The stock is up more than 40 percent since early April, when Musk jokingly tweeted about Tesla going bankrupt.