Tesla to Cut Workforce by 9% In Bid for Sustainable Profit
Tesla Inc. on Tuesday said it will cut about 9% of its workforce in an effort to deliver its first profit during a make- orbreak period of building a massmarket electric car.
The layoffs of about 3,500 employees come as Chief Executive Elon Musk reorganizes Tesla’s management structure to make it flatter, and as the company tries to ramp up production of the allelectric Model 3 compact sedan.
In a memo to employees, Mr. Musk said the job cuts are mostly aimed at salaried staff and won’t affect production workers assembling the company’s vehicles. “This will not affect our ability to reach Model 3 production targets in the coming months,” he wrote.
Tesla investors welcomed the news on Tuesday, sending the company’s shares up more than 3% to $ 342.77. The stock has fallen about 8.8% over the past 12 months amid Tesla’s struggles to crank up vehicle production.
The Silicon Valley auto maker, which hasn’t turned an annual profit in its 15-year history, is facing heightened scrutiny from analysts and investors after starting assembly of the Model 3 last July and missing several production milestones that would have enabled it to ge- nerate free cash flow. Mr. Musk has promised to finally reach the goal of making 5,000 Model 3 sedans a week by the end of June – a rate that if maintained would allow the company to show a profit in the third and fourth quarters, he has said.
“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,” Mr. Musk wrote in the email to employees Tuesday. “That is a valid and fair criticism of Tesla’s history to date.”
Mr. Musk made similar comments in May after burning through more cash in the first quarter than analysts had expected. At the time, he also reiterated statements that he didn’t want to raise more cash— even as several analysts said Tesla will have to do so.
The company finished the first quarter with $2.7 billion in cash on hand. Tesla announced it was paring back planned capital expenditures this year to less than $3 billion from $3.4 billion last year. Its loss attributable to common shareholders in the first quarter was $ 710 million, the fifth consecutive quarter of record losses.
Tesla said the latest workforce cuts are affecting all departments except production workers. They come as Tesla prepares to launch other vehicles over the coming years. Mr. Musk has said he expects to reveal the Model Y compact sport- utility vehicle in March, ahead of production planned to start in the first half of 2020. He also has said production of the company’s tractor-trailer truck and new sports car, the Roadster, will be in 2020.
“Cutting your way to profitability as you try to grow and launch vehicles is very difficult,” Dave Sullivan, an analyst for AutoPacific Inc., said. “It seems like a strange time to cut unless you have promises about profitability for Q3 and your revenue can’t support current staffing levels.”
“Cutting heads will likely only lead to more delays, more stress and lower morale,” Mr. Sullivan said.
Tesla is facing increased competition from traditional auto makers, such as Porsche and Jaguar, which are racing to bring their own all- electric cars to market, and from companies working to develop competing self- driving car technology. On Twitter, Mr. Musk acknowledged that he was losing
Please see TESLA page II