Cars and Drivers

Are Tesla Layoffs Over?

Douglas A. McIntyre

Published: June 13, 2018 7:23 am

Last Updated: January 11, 2020 10:25 pm

Tesla (NASDAQ: TSLA) laid off 9% of its workforce. CEO Elon Musk said the 3,500 or so jobs did not affect employees producing the company’s cars, particularly the anticipated but late Model 3. The move was seen as an action to push Tesla toward profitability. Investors worry that Tesla does not have enough money to make it through the end of the year, without raising more. In many circumstances, money losing companies which announce layoffs do them in tranches.  If Tesla’s financial predicament becomes more difficult, it may have to contemplate more downsizing

Musk recently warded off an attempt to split his chairman’s role from that of the CEO. Musk argued there is nothing wrong with being both. The majority of shareholders agreed, although some of the largest ones objected. The vote of confidence does not take Musk off the hook. He says he can produce 5,000 Model 3 vehicles a week. The would may dampen the current shareholder revolt. However, he may not reach the number. After that, there will be pressure to move toward 10,000 a week

Given Tesla’s growing need for fixed assets which include factory installations, and vehicle distribution, Musk cannot cut costs in these areas, which represent a very large part of the company’s expenses. He still has nearly 35,000 workers. It is hard to say how many of those are “dispensable”. At most companies, the number is measured by desperation.

Musk tweeted his memo to employees. Among the details were that there were some “duplication of roles”, and job functions which were “difficult to justify”.  Duplication can be replaced with essential jobs which are too expensive. If Tesla’s financial fortunes continue downward, layoffs are not over.