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Holly LaFon
Holly LaFon
Articles (9009)  | Author's Website |

Tesla Lays Off 9% of Employees in Bid for Profit

Musk promised profit by second half of the year

June 12, 2018 | About:

Tesla (NASDAQ:TSLA) CEO Elon Musk announced Tuesday that the company would lay off 9% of its workforce – about 3,000 employees – in its first sweeping headcount reduction since October.

Musk tweeted his email to the company because it had “already leaked to media.” According to the letter, the company’s growth had led to “some duplication of roles” it wants to streamline as it concedes that it needs to turn a profit soon.

“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 wrote. “That is a valid and fair criticism of Tesla’s history to date."

Tesla has not produced a profit in its 15 years of existence. In 2017, it reported $1.96 billion in net losses, the worst in its history. Musk said at the company’s June 6 shareholder meeting that Tesla would report a profit by the second half of the year.

The layoffs also come as Tesla pushes to meet its production targets for the second quarter. Tesla has promised to produce 5,000 of its most affordable vehicle, the Model 3, by the end of the second quarter. That would represent an increase of almost 3,000 vehicles from its first-quarter peak of 2,020. Musk said at Tesla’s shareholder meeting that he was confident the company would achieve the goal.

Tesla will cut primarily salaried positions and not production roles. The cuts will not affect its ability to meet production targets for the Model 3, Musk wrote.

Tesla last fired workers in October, letting go of an estimated 400 to 1,200 people. The cuts were not layoffs, but terminations due to performance, Tesla said. Some employees disputed those accounts, suggesting it amounted to a cost-cutting measure.

The cash-strapped company has turned to layoffs to shore up money in the past. In 2008, as Musk took over as CEO, Tesla laid off roughly 20% of its 363 employees. At the time, Musk said he expected the company to turn cash flow positive in the next six to nine months, an event investors waited until 2013 for and haven’t seen since.

About the author:

Holly LaFon
I'm a financial journalist with a master of science in journalism from Medill at Northwestern University.

Visit Holly LaFon's Website


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