Tesla lays off thousands of workers as part of a ‘company-wide restructuring’

Illustration by Alex Castro / The Verge

Tesla has laid off about 9 percent of its employees as part of a “company-wide restructuring,” according to an email sent to staff by CEO Elon Musk this morning. The cuts, which account for more than 3,000 jobs, will not affect the company’s continued effort to ramp up production of the Model 3 sedan, Musk said.

“We made these decisions by evaluating the criticality of each position, whether certain jobs could be done more efficiently and productively, and by assessing the specific skills and abilities of each individual in the company,” Musk wrote. “In order to minimize the impact, Tesla is providing significant salary and stock investing (proportionate to the length of service) to those we are letting go.”

Tesla has recently faced pressure from its investors to ramp up production of the Model 3. The company had $2.6 billion in cash at the end of the first quarter of the year, and it’s spending around $1 billion every quarter. While sales of the more expensive Models S and X continue to tick up each quarter, the company needs to start making money on the Model 3 if it wants to turn a profit, or it will have to borrow or raise more capital soon — something Musk has insisted the company won’t do this year.

“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,” he wrote today. “What drives us is our mission to accelerate the worlds transition to sustainable, clean energy, but we will never achieve that mission unless we eventually demonstrate that we can be sustainably profitable. That is a valid and fair criticism of Tesla’s history to date.”

The company has missed a number of deadlines for Model 3 production targets, though the CEO said at last week’s annual shareholder meeting that Tesla is now making 500 per day, or about 3,500 per week. Tesla is trying to get to a rate of 6,000 Model 3s per week by the middle of the year, at which point it will break even on each car it turns out, according to the company’s most recent earnings report.

Musk first signaled that a reorganization of the company’s structure was coming in an April email to Tesla staff. In it, he wrote about how unnecessary expenses, “excessive” meetings, “poor” communication, and a “Russian nesting doll” series of contractors who “never want to end the money train” were hampering the company’s progress toward meeting his ambitious goals.

In a subsequent May email, Musk announced he was “flattening” Tesla’s management structure. That followed news that the company’s chief engineer was taking a leave of absence and the departure of Tesla’s government safety liaison. Later in the month, Tesla announced a handful of new hires at the director and executive level, some coming from companies like Apple and Amazon.

The new round of layoffs will not affect Tesla’s recent efforts to hire more employees to shore up production of the Model 3, Musk said in today’s email. “[T]here is still a significant need for additional production personnel,” he wrote. “I also want to emphasize that we are making this hard decision now so that we never have to do this again.”

In April, Musk asked employees to refer “anyone you know who you think meets the Tesla bar for talent, drive and trust” so that the company could produce its newest electric car around the clock.

The push to make more Model 3s, which Musk has referred to as “production hell,” has faced scrutiny from a number of parties inside and outside of the company. This week, Tesla’s former director of environmental, health, safety, and sustainability filed a lawsuit claiming he was wrongfully terminated for calling out unreported injuries at the company’s Fremont assembly factory. (Tesla says the former director was fired after the company received an “onslaught of complaints” about his behavior in the workplace.)

In an April report from the nonprofit news organization Reveal, five former members of that same team made similar claims about how Tesla allegedly didn’t properly report workplace injuries. A recent CNBC report detailed a number of previously undisclosed fires at the company’s paint shop.

“This is the most excruciating, hellish several months that I’ve ever had,” Musk said at the recent shareholder meeting.

In his email to employees, Musk also announced that Tesla will discontinue a recently announced initiative to sell its home energy generation and storage products at Home Depot. “The majority of Tesla employees working at Home Depot will be offered the opportunity to move over to Tesla retail locations,” he wrote.

Correction: This article previously misquoted part of Musk’s email. Musk said there was “valid and fair criticism,” not “valid unfair criticism.” It has been updated to reflect this change.

Comments

Oh no. Looks like somebody tried to unionize again. The nerve.

Does this have anything to do with unions?

It might. We don’t really know.

Seems unlikely. They aren’t cutting from the production lines.

Last time they tried to unionize the people who tried it got laid off in a mass firing

Musk also threatened people who unionize with losing their stock bonuses. He does not like his work force getting uppity. Hard to extort them if they have leverage.

I’m not sure any of that is true. I know the UAW filed a complaint.

I’m not sure any of that is true

It’s not a matter of belief. Those were his own words. He tweeted it out.

Musk also threatened people who unionize with losing their stock bonuses

I meant the mass firing part. No evidence of that. The stock bonus part is just common sense. What union auto worker gets stock options? They can’t have it both ways. If they want to be union auto workers, they get paid the same as every other union auto worker. That’s how the world works. It’s not a threat, it’s reality.

What union auto worker gets stock options? They can’t have it both ways.

A worker. Being in a union doesn’t make you any different, you’re a worker just like any other. You can’t punish people for being in a union. That’s why Musk is getting sued.

"Having it both ways" you mean having a job and having basic rights? Preposterous I agree. Wtf.

Ummm… stock options in a Silicon Valley company is not a basic right! WOW!

The whole point of unions is collective bargaining. The union negotiates your deal for you. You get all sorts of protections, etc., but what you don’t get is stock options. Why should Tesla workers get stock options if Chevy workers don’t? Are Tesla workers better than Chevy workers? Of course not! Everyone is exactly the same and equally valuable, and should therefore be compensated in exactly the same way. That’s what unions are all about. You get paid more the longer you’ve been working there… period – not because you happen to work in Silicon Valley, or you are a better performer. No, just length of service. If Tesla workers think that they will join the union, and that the collective bargaining agreement will include stock options, they’re high. If they like their stock options they shouldn’t vote to join the union. If they would rather get the standard union deal, then by all means they should join. But again, they can’t have it both ways.

And by the way, Musk isn’t getting "sued" over this. The UAW has filed a complaint with the Labor Board, which is one of their most common tactics. They file about 20,000 such complaints every year, most of them baseless.

California has some of the best labor protection laws in the world. If Tesla is actually mistreating workers that will be dealt with, and that sure doesn’t require a union.

back your claim about the stock bonuses please, otherwise you’re one of those who believe everything they read on the web

Elon Musk tweeted it himself. Should I not believe him?

where’s the threatening tweet?

It’s because of crap like this and the company’s atrocious safety record that I think they’re going to get chased out of California eventually.

Oh no. Someone didn’t read the article again.

Oh no, somebody actually did read the article and knows the story behind the previous round of firings for context.

But do you know the story? Really? You know that people were fired, which happens for many different reasons… and you know that the UAW filed a complaint – one of 20,000 they file each year – but do you have even a shred of evidence that anyone was fired for supporting the union? Because if you do, you’re the only person with that information.

Good!

It will be a good social experiment to see how non self entitled power tripping union types will behave in a factory environment where productivity and effort actually matter.

IMO Although Unions in the US are way too corrupt and abuse their power and ask for increasingly ridiculous things all the time "because they can"..

It will be a good social experiment to see how non self entitled power tripping union types will behave in a factory environment where productivity and effort actually matter.

You mean the factory that has been making headlines for months specifically because it is less productive than any of the unionized plants across the US?

Tesla workers don’t want the union. The UAW spent over $400,000 last year trying to unionize Fremont, and they’re getting nowhere.

Did I miss it in the articles? Where did the job cuts come from?

Where its not coming from is the production line – none of the jobs being cut are from the factory.

sources?

read the linked tweet

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