Tesla’s up-and-down 2018 continued into the start of summer, when CEO Elon Musk announced the company would lay off about 9% of its workforce. As the company dealt with accusations of unfair labor practices and the bumpy release of its Tesla Model 3, news of the workforce cuts could hardly come at a worse time.
Yet Musk framed the staff reductions as a positive step forward, and some Tesla employees actually agreed with their former boss. Here’s everything you need to know about the June 12 announcement and the subsequent fallout.
1. The layoffs number between 3,000-4,100 employees.
The Los Angeles Times reported the Tesla workforce numbered 37,543 employees at the end of 2017. That total would equal 3,600 layoffs. With the company’s production ramp, it’s reasonable to expect that number went much higher in 2018.
Several outlets have reported that Tesla’s overall headcount exceeded 45,000 employees by June. Depending on the actual number, the 9% cuts range from between 3,000 and 4,100 employees.
2. Others were actually fired.
In a June 15 VICE report, a current Tesla employee said the company actually fired several workers on the production line the same week. However, he noted that performance was likely a factor in those dismissals.
Since so many Tesla stories cover events of previous months, we don’t see any contradictions with what Musk said in his internal email. Every big company makes changes on a regular basis, and the bigger story is the elimination of other positions.
3. Musk said the cuts would avoid production staff.
While the cuts would affect a significant percentage of the company, Musk informed employees it would not include production staff. “These cuts were made almost entirely of our salaried population,” he wrote.
As pressure mounts for the company to deliver more Model 3 sedans as promised, it’s easy to see why Musk would emphasize this in his email. He knew it would get leaked, and it did (almost immediately).
4. Profitability continues to be Tesla’s bugaboo.
Right away, Musk acknowledged criticisms about Tesla’s failure to turn a profit in 15 years. It’s the reason we saw the affordable Model 3 put on the back burner, and it made the company look like it continues catering only to wealthy buyers.
While that’s fine for a luxury automaker, but Tesla has ambitions of cracking the wider auto market. Apparently, that would continue to be impossible without lower operating expenses. Hence the workforce cuts, and Wall Street analysts welcomed the move.
5. Changes came to the solar business as well.
Since Tesla had a standalone solar business, the company sold its energy products through some Home Depot stores. Along with the layoffs, Musk said that partnership would come to an end.
Though the company said in February 2018 it would expand to all 800 Home Depots in America, that plan halted by as of June. Musk said the employees who worked at the Home Depot locations could continue with the company if they wanted.
6. Employee severance packages included some questionable conditions.
In a Bloomberg report, laid-off Tesla employees described a severance agreement that appears designed to muffle worker-safety complaints. According to the wording, employees would receive up to two months’ severance pay if they agreed to company-friendly conditions.
For example, the former employee would agree safety concerns and complaints had been “addressed to your satisfaction.” Likewise, the agreement said the employee would “assist Tesla’s defense against claims,” Bloomberg reported.
With worker-safety issues plaguing Musk in recent months, this language continued to trouble experts in the labor field.
7. Tesla became the latest company to announce layoffs — tax cuts and all.
While the GOP tax cuts were sold as a major boon for America’s workers, Tesla became the latest of over a dozen companies that laid off large numbers of employees after the legislation passed.
While Tesla did not explicitly say the company acted to benefit shareholders, the stock climbed over 7% in value in the week following the announcement. The fact is, Wall Street likes layoffs, and Tesla was the latest to deliver for investors.
8. Musk said the cuts happened so Tesla would ‘never have to do this again.’
In his email to employees, Musk wrote a very curious line. He said the company was making the tough decision to lay off staff “so that we never have to do this again.”
Obviously, it wouldn’t be the first time Musk over-promised on something. However, it seems odd that he would pretend the company would only grow and expand in the future.
At least in the past two years, layoffs have been an annual ritual at Tesla.
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