The electric car maker will lay off 9% of its more than 40,000 employees due to restructuring.
Tesla is to cut 9% of its workforce as part of restructuring efforts to reduce costs, company head Elon Musk confirmed yesterday.
In an internal letter that Musk posted to Twitter after sections leaked to the press, the CEO claims the cuts will come entirely from salaried positions, and affect “production associates” integral to meeting Tesla Model 3 targets over the coming months.
The driving force behind the firings is to reduce costs so that Tesla can turn an annual profit – something the company hasn’t done since its founding, 15 years ago.
“Tesla has grown and evolved rapidly over the past 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,” Musk wrote in a letter to employees.
“We made these decisions by evaluating the criticality of each position, whether certain jobs could be done more efficiently or productively, and by assessing the specific skills and abilities of each individual in the company.”
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
Tesla will also be “continuing to flatten” its management structure, to “eliminate bureaucracy and move faster”. The letter also explains that the company will not renew its residential sales agreement with Home Depot, as it aims to sell more solar panel and battery storage through Tesla’s own online shopfront.
Tesla has been under a lot of pressure to show it can be a profitable enterprise, with Musk recently promising shareholders that his company could produce 5,000 of its Tesla Model 3 vehicles a week. The company has yet to reach that goal. Tesla’s shares have taken a battering in recent months, with record losses reported in May.
At the same time, the company’s headcount has been swelling, with a reported 15% increase since the start of the year. That growth means this round of cuts should leave the company with more employees than it had last year, although the layoffs remain a significant trimming of Tesla’s workforce.
According to Bloomberg, Tesla has cumulatively lost about $US5.4 billion, and could stand to lose another $US1.3 billion in the next year. In his letter Musk emphasises that the cuts are an effort to make Tesla a profitable entity.
“To be clear, Tesla will still continue to hire outstanding talent in critical roles as we move forward and there is still a significant need for additional production personnel,” Musk writes. “I also want to emphasize that we are making this hard decision now so that we never have to do this again.”
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