Tesla to sack 9% of work­ers

So­lar City-Home De­pot deal also com­ing to end

USA TODAY US Edition - - MONEY - Nathan Bomey

Tesla said Tues­day that it will cut thou­sands of jobs, aim­ing to im­prove its fi­nances amid a pe­riod of tor­ren­tial losses as it ac­cel­er­ates pro­duc­tion of its new­est electric ve­hi­cle.

Tesla CEO Elon Musk con­firmed the com­pany is shed­ding about 9 per­cent of its work­force — “almost en­tirely” salaried em­ploy­ees but not pro­duc­tion-line work­ers, ac­cord­ing to an in­ter­nal email he posted to Twit­ter.

The com­pany had 37,543 full-time em­ploy­ees as of Dec. 31, ac­cord­ing to a pub­lic fil­ing. At that level, 9 per­cent would equal nearly 3,400 jobs.

The com­pany, based in Palo Alto, Cal­i­for­nia, also plans to end its deal to sell so­lar pan­els at home im­prove­ment chain Home De­pot. In­stead, Tesla will fo­cus on sell­ing so­lar power through its own stores. The moves come as Musk is fac­ing pres­sure to ramp up out­put of the new Model 3 electric sedan and show bot­tom-line prof­itabil­ity.

Musk said the cuts would not af­fect the com­pany’s abil­ity to speed up pro­duc­tion. “Tesla has grown and evolved rapidly over the last sev­eral years, which has re­sulted in some du­pli­ca­tion of roles and some job func­tions that, while they made sense in the past, are dif­fi­cult to jus­tify to­day,” he told work­ers in the email.

Tesla rep­re­sen­ta­tives were not im­me­di­ately avail­able for more com­ment.

“The pres­sure is on for Tesla to cut the red ink as the third quar­ter ap­proaches,” Au­toPa­cific an­a­lyst Dave Sul­li­van said. “Cut­ting your way to prof­itabil­ity as you try to grow and launch ve­hi­cles is very dif­fi­cult. It’s hard to be­lieve Tesla had enough fat to trim in their salaried ranks. I ex­pect Musk to pull more levers in the next few months as the push for prof­its continues.”

Musk said the cuts won’t slow pro­duc­tion, which is hap­pen­ing at Tesla’s assem­bly plant in Cal­i­for­nia and its bat­tery fac­tory in Ne­vada. Delays at each op­er­a­tion have pre­vented the com­pany from rapidly ful­fill­ing paid cus­tomer reser­va­tions for the Model 3.

“It’s no­table that they left the pro­duc­tion teams alone be­cause it’s vi­tal that they get the Model 3 pro­duc­tion rolling,” Au­to­trader an­a­lyst Michelle Krebs said.

Musk said June 5 that it’s “quite likely” the com­pany will reach its goal of mak­ing 5,000 Model 3 cars a week by the end of the month. Since then, Tesla shares have gained nearly 18%, clos­ing Tues­day at $342.77. The his­tor­i­cally volatile stock had been in a slump since late March, when it briefly dipped be­low $250 as in­vestors grew con­cerned about pro­duc­tion delays, Tesla spend­ing and safety investigations.

The au­tomaker has lost more than $1.7 bil­lion over its last four com­plete quar­ters, rais­ing the fi­nan­cial stakes for the com­pact car.

“What drives us is our mission to ac­cel­er­ate the world’s tran­si­tion to sus­tain­able, clean en­ergy, but we will never achieve that mission un­less we even­tu­ally demon­strate that we can be sus­tain­ably prof­itable,” Musk said in the email. “That is a valid and fair crit­i­cism of Tesla’s his­tory to date.”

Tesla’s growth has made the com­pany the pre-em­i­nent maker of electric ve­hi­cles. But it has come at a steep cost. Musk has ad­mit­ted sev­eral mis­takes with Tesla, in­clud­ing too much au­to­ma­tion on the pro­duc­tion line and an “out of con­trol” net­work of third­party con­trac­tors.

“So we’re go­ing to scrub the bar­na­cles on that front. It’s pretty crazy,” Musk said in May. “You’ve got bar­na­cles on bar­na­cles. So there’s go­ing to be a lot of bar­na­cle re­moval.”

Musk has also lashed out against the me­dia in re­cent weeks, crit­i­ciz­ing many re­porters as un­eth­i­cal and blast­ing what he per­ceives as un­fair scru­tiny of Tesla’s par­tially self-driv­ing ve­hi­cle tech­nol­ogy.

The Home De­pot agree­ment that’s end­ing in­volved sales of Tesla so­laren­ergy prod­ucts at about 800 stores. Tesla em­ploy­ees based at those lo­ca­tions will be re­moved.

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