Tesla has laid off about nine percent of its employees, Electrek first reported. This is part of the reorganization Musk talked about in May on the companys quarterly earnings call. The layoffs reportedly started on Monday and will be made official at some point today. Tesla, which also operates SolarCity, is only laying off salaried employees. Tesla isnt letting go any production associates, as the company is trying to ramp up Model 3 production. 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, Tesla CEO Elon Musk wrote to employees in an email obtained by TechCrunch. As you know, we are also continuing to flatten our management structure to help us communicate better, eliminate bureaucracy and move faster. When Tesla acquired SolarCity in 2016, its headcount increased to more than 30,000 employees. Toward the end of 2017, Tesla had around 37,000 employees. In February, Tesla made a deal with Home Depot to sell the PowerWall and solar panels at 800 of Home Depots locations. But Tesla has reportedly not renewed its contract, which means the Tesla employees working at Home Depot wont be needed anymore. Instead, Musk said in his email that they will be offered the opportunity to move over to Tesla retail locations. The hope with the restructure is to get to profitability. Last quarter, Tesla reported record revenues along with record losses. In Q1 2018, Teslas net losses were a record $784.6 million ($4.19 per share). Heres the full email Musk wrote to staffers: As described previously, we are conducting a comprehensive organizational restructuring across our whole company. 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. As part of this effort, and the need to reduce costs and become profitable, we have made the difficult decision to let go of approximately 9% of our colleagues across the company. These cuts were almost entirely made from our salaried population and no production associates were included, so this will not affect our ability to reach Model 3 production targets in the coming months. 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. 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 Teslas history to date. This week, we are informing those whose roles are impacted by this action. 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. As you know, we are also continuing to flatten our management structure to help us communicate better, eliminate bureaucracy and move faster. In addition to this company-wide restructuring, weve decided not to renew our residential sales agreement with Home Depot in order to focus our efforts on selling solar power in Tesla stores and online. The majority of Tesla employees working at Home Depot will be offered the opportunity to move over to Tesla retail locations. I would like to thank everyone who is departing Tesla for their hard work over the years. Im deeply grateful for your many contributions to our mission. It is very difficult to say goodbye. In order to minimize the impact, Tesla is providing significant salary and stock vesting (proportionate to length of service) to those we are letting go. 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. I also want to emphasize that we are making this hard decision now so that we never have to do this again. To those who are departing, thank you for everything youve done for Tesla and we wish you well in your future opportunities. 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 competitive industries on Earth, where just staying alive, let alone growing, is a form of victory (Tesla and Ford remain the only American car companies who havent gone bankrupt). Yet, despite our tiny size, Tesla has already played a major role in moving the auto industry towards sustainable electric transport and moving the energy industry towards sustainable power generation and storage. We must continue to drive that forward for the good of the world. Thanks,
Job cuts are needed to reach sustained profitability, Elon Musk said. Tesla is cutting nine percent of its workforce, CEO Elon Musk announced today in a memo to staff. "We are a small company in one of the toughest and most competitive industries on Earth," Musk wrote. He argued that cost cutting was necessary to turn Tesla into a sustainably profitable company. The layoffs are "almost entirely" in salaried positions and won't impact Tesla's efforts to increase Model 3 production, Musk said. Tesla didn't give an exact figure for the number of layoffs. But Tesla had 37,543 full-time employees at the start of the year and has hired more since then. So a nine-percent cut means letting more than 3,000 workers go. That makes these layoffs much more significant than the hundreds of workers Tesla fired last fall. At the time, Tesla had 33,000 employees, suggesting that Tesla's headcount is still on an upward trajectory overall. Tesla's announcement comes a month after Musk announced a restructuring of Tesla's organizational chart. Musk wants to flatten the management structure at the company to make it less bureaucratic. Tesla has been burning cash almost continuously since it was founded 15 years ago. The company has enjoyed positive cash flow and profits for only two brief periods in the last eight years—one in late 2013 and another in mid-2016. Each time, after a few quarters of positive cashflow, Tesla would ramp up production of another car model—first the Model X, then the Model 3—and rack up more big losses, as this chart of free cash flow from Bloomberg shows. This isn't too surprising. We'd expect any startup in a capital-intensive business to spend heavily as it scales up. But Tesla obviously can't keep losing money forever. In recent months, Musk has pledged that Tesla will reach sustained profitability by the third quarter of 2018—just a few months from now. That prediction has been met with skepticism by many analysts. But Musk has promised an acceleration of Model 3 manufacturing, which will allow the company to bring in a lot more revenue. At the same time, the job cuts announced today will reduce Tesla's costs, allowing the company to reach profitability more easily.