- Tesla employed around 100,000 people at the end of 2021
- Musk warned staff on Tuesday to return to the office or leave
- US leaders seem increasingly gloomy on the economy
SAN FRANCISCO, June 3 (Reuters) – Tesla (TSLA.O) CEO Elon Musk has a “super bad feeling” about the economy and must cut about 10% of the electric carmaker’s salaried workforce, he said in emails seen by Reuters.
A message sent to executives on Thursday outlined his concerns and told them to “suspend all hiring globally”. The grim outlook came two days after the billionaire told staff to return to work or leave and adds to a growing chorus of warnings from business leaders about recession risks.
Tesla shares fell 9% in U.S. trading on Friday after the Reuters report. The tech-heavy Nasdaq (.IXIC) fell about 2%.
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In another email to employees on Friday, Musk said Tesla would cut its salaried workforce by 10% because it has become “overstaffed in many areas.” But “the hourly workforce will increase,” he said.
“Note that this does not apply to anyone who actually builds cars, batteries or installs solar power,” Musk wrote in the email seen by Reuters.
Nearly 100,000 people were employed at Tesla and its subsidiaries at the end of 2021, according to its annual filing with the SEC. It did not break down the number of salaried and hourly workers.
The Texas-based company was not immediately available for comment.
Musk has warned in recent weeks of recession risks, but his email ordering a hiring freeze and staff cuts was the most direct and high-profile message of its kind from the head of a automaker, with others describing exorbitant demand. Read more
“Elon Musk has a unique and insightful view of the global economy. We believe a message from him would have high credibility,” Morgan Stanley analyst Adam Jonas said in a statement.
So far, demand for Tesla cars and other electric vehicles (EVs) has remained strong, and many traditional indicators of a slowdown — including increased dealer inventory and U.S. incentives — have not faltered. not materialized.
But Tesla has struggled to restart production at its Shanghai factory after COVID-19 lockdowns forced costly outages.
“It is always better to introduce austerity measures in good times than in bad times. I take these statements as a warning and a precautionary measure,” said Hannover-based NordLB analyst Frank Schwope.
Musk’s bleak outlook echoes recent comments from executives including JPMorgan Chase & Co CEO Jamie Dimon and Goldman Sachs Chairman John Waldron.
A “hurricane is right out there on the road coming our way,” Dimon said this week. Read more
Inflation in the United States is hitting 40-year highs and has caused an increase in the cost of living for Americans, while the Federal Reserve faces the difficult task of reining in demand enough to dampen inflation without causing of recession.
It was also not immediately clear what implication, if any, Musk’s views would have for his $44 billion Twitter bid (TWTR.N). U.S. antitrust regulators cleared the way for the deal on Friday, pushing Twitter shares up 2%. Read more
Several analysts recently cut Tesla’s price targets, predicting a loss of production at its Shanghai plant, a hub supplying electric vehicles to China and for export.
China accounted for just over a third of Tesla’s global shipments in 2021, according to company disclosures and published sales data there. On Thursday, Daiwa Capital Markets estimated that Tesla had around 32,000 orders awaiting delivery in China, compared to 600,000 vehicles for BYD (002594.SZ), its biggest EV rival in that market.
‘BREAK ALL HIRING’
Prior to Musk’s warning, Tesla had around 5,000 job postings on LinkedIn, from sales in Tokyo and engineers at its new Berlin gigafactory to deep learning scientists in Palo Alto. He had scheduled an online recruitment event for Shanghai on June 9 on his WeChat channel.
Musk’s request for staff to return to the office has already been rebuffed in Germany. Read more And his job cut plan would meet resistance in the Netherlands, where Tesla has its European headquarters, a union leader has said.
“You can’t just fire Dutch workers,” FNV union spokesman Hans Walthie said, adding that Tesla would have to negotiate with a union the terms of any departure.
In a Tuesday email, Musk said Tesla employees must be in the office for at least 40 hours a week, closing the door to any remote work. “If you don’t show up, we’ll assume you quit,” he said.
Jason Stomel, founder of tech talent agency Cadre, said the back-to-the-office memo could be a way to entice people to leave.
“(Musk) knows there’s a percentage of workers who just won’t come back,” which he says would be cheaper for Tesla because no severance would be needed.
Musk has repeatedly raised the risk of recession in recent comments.
Speaking remotely at a mid-May conference in Miami Beach, he said: “I think we’re probably in a recession and the recession is going to get worse.”
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Reporting by Hyunjoo Jin Additional reporting by John O’Donnel, Ju-min Park, Zoey Zhang, Toby Sterling and Sarah Morland and Nivedita Balu; edited by John Stonestreet, Mark Potter, Nick Zieminski and Lisa Shumaker
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