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Tesla Cuts 9% of its Global Workforce as Pressure Mounts to Turn a Profit
It appears the cold hard truth has finally set in on Elon Musk.
The billionaire CEO announced on Tuesday that Tesla will be cutting 9% of its global workforce – roughly 3,500 employees – as it ramps up efforts to finally turn the first annual profit in its 15-year history. In a memo to employees, Musk indicated that the cuts were being made “almost entirely” to salaried employees, with no one on its production team being let go.
“So this will not affect our ability to reach Model 3 production targets in the coming months,” Musk added.
Difficult, but necessary Tesla reorg underway. My email to the company has already leaked to media. Here it is unfiltered: pic.twitter.com/4LToWoxScx
— Elon Musk (@elonmusk) June 12, 2018
This is the biggest round of layoffs in the Tesla’s history, according to Bloomberg, and the company has lost a total of $5.4 billion across its 15 years. The bad news doesn’t end there, as analyst estimates compiled by Bloomberg predict the “carmaker may lose another $1.3 billion over the next four quarters.”
The reality for Musk is that he wildly overestimated Model 3 production, and is now “pumping the brakes from years of hiring at breakneck speed,” as Bloomberg notes.
“We still have reservations on Tesla shares given production challenges, competitive threats intensifying as well as balance sheet obligations with debt quickly coming due,” Jeff Osborne, an analyst at Cowen & Co., wrote in an email. The job cuts reflect Musk’s “sudden, new-found commitment to hitting profitability,” he said.
The across-the-board cutbacks, which almost entirely involve salaried workers at Tesla’s California headquarters and beyond, are an admission that Musk’s ambition has at times exceeded the financial realities of building a car company from scratch.
Tesla’s stock has dropped 4.5 percent over the past 12 months, Bloomberg reports.
Photo: Getty iStock