Tesla cuts 9% of workforce in bid for profit

Keith Laing
Detroit News Washington Bureau

Electric car maker Tesla Inc. is laying off about 3,600 employees in a bid to turn a profit for the first time in its history.

Tesla CEO Elon Musk said in an email to employees that he released Tuesday on Twitter that the cuts will apply to 9 percent of the company’s workforce, which totals about about 40,000.

Musk said the cuts will apply to salaried workers, but not to production workers. He said the layoffs would not affect output of its Model 3 sedan, which has been plagued by production problems.

“Given that Tesla has never made an annual profit in the almost 15 years since we have existed, profit is obviously not what motivates us,” Musk wrote in the email. “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 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.”

He said Tesla is making the cuts in the hopes of avoiding the need to lay off more workers in the future.

“To those who are departing, thank you for everything you’ve done for Tesla and we wish you well in your future opportunities,” he wrote. “To those remaining, I would like to thank you in advance for the difficult job that remains ahead. We are a small company in one of the toughest and most competive indsutries on Earth, where just staying alive, let alone growing, is a form of victory.”

Tesla stock dropped on the news Tuesday, but still showed a positive upturn for the day: After rising 6.9 percent before the news, it closed the day up 3.2 percent at to $342.77.

The announcement comes after Tesla posted a $709.6 million loss in the first quarter of 2018, more than double what it lost in the same period a year ago. The Silicon Valley automaker burned through $745.3 million in the first three months of the year. Musk previously tweeted an April Fools’ joke that his company had gone bankrupt.

Michelle Krebs, senior analyst for Autotrader, said Tesla’s layoffs were foreseeable giving the pressure the company is facing to post profits.

“Tesla has signaled organizational changes in recent weeks and here it is,” she said. “It is clear that Tesla is under tremendous pressure to finally turn a profit and is attempting to address it by cutting overhead. Also notable is Tesla is not cutting production jobs at a time when pushing Model 3s out the door is a top priority.”

Rebecca Lindland, executive analyst for Kelley Blue Book, added: “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. This is an attempt to cut costs and contain expenses.”


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Twitter: @Keith_Laing