Tesla CEO Elon Musk said he has a “super bad feeling” about the economy and that the electric car company needs to cut about 10% of its salaried staff.
On Thursday, he sent a message to the company’s top executives outlining his concerns and requesting that they “pause all hiring worldwide.” Two days earlier, the billionaire had told employees to return to work or leave, and now the gloomy forecast adds to the growing chorus of business leaders warning about the dangers of a recession.
After the report, Tesla shares fell 9% in U.S. trading on Friday. Tech-heavy NASDAQ index fell about 2%. Tesla CEO Elon Musk said in an email to employees on Friday that the company plans to cut 10 percent of its salaried staff because of the company’s financial woes “overstaffed in many areas.”
But “hourly headcount will increase,” he said. “Note, this does not apply to anyone actually building cars, battery packs, or installing solar,” Elon Musk wrote in the email.
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At the end of 2021, Tesla and its subsidiaries employed nearly 100,000 people, according to the company’s annual SEC filing. It did not differentiate between hourly and salaried employees.
However, while the CEO of an automaker had previously warned about the dangers of recession, Musk’s email ordering a hiring freeze and staff cuts was the most direct and high-profile of its kind.
“Elon Musk has a uniquely informed insight into the global economy. We believe that a message from him would carry high credibility,” Adam Jonas, an analyst Morgan Stanley, said in a report.
Musk has warned in recent weeks about the risks of recession, 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 an automaker 3/6 pic.twitter.com/100rFZyKqO
— Reuters (@Reuters) June 3, 2022
Lockdown in Shanghai
There have been no signs of a downturn in demand for Tesla cars and other electric vehicles (EV) so far, including increased dealer inventories and incentives in the United States.
After costly outages caused by COVID-19 lockdowns, Tesla has had difficulty resuming production at its Shanghai factory.
“It is always better to introduce austerity measures in good times than in bad times. I see the statements as a forewarning and a precautionary measure,” said Hanover-based NordLB analyst Frank Schwope.
Executives such as JPMorgan Chase CEO Jamie Dimon and Goldman Sachs President John Waldron have previously voiced their gloom and doom over the future of the economy.
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“A hurricane is right out there down the road coming our way,” Dimon said this week. A 40-year high in inflation has driven up the cost of living for Americans, and the Federal Reserve is tasked with containing the inflationary trend without triggering a recession.
It wasn’t immediately clear whether Elon Musk views on Twitter would have any bearing on his $44 billion takeover bid. On Friday, US antitrust regulators approved the deal, sending Twitter shares up 2%.
Several analysts have recently cut Tesla’s price targets, forecasting lost output at its Shanghai plant, a hub for supplying EVs to China and for export. Tesla’s stock has dropped recently.
According to Tesla’s disclosures and sales data released in China, the country will account for just over a third of the company’s global deliveries in 2021. As of Thursday, Daiwa Capital Markets estimated that BYD had 600,000 vehicles on order in China, while Tesla had 32,000 on order.
Tesla had about 5,000 job postings on LinkedIn before Musk’s warning, ranging from sales in Tokyo to engineers at its new Berlin gigafactory to deep learning scientists in Palo Alto. On June 9, it had planned an online hiring event on its WeChat channel for Shanghai.
In Germany, there has already been a backlash to Tesla CEO Elon Musk’s demand that employees return to the office.
A union official in the Netherlands, where Tesla’s European headquarters are located, said that his proposed layoffs would be met with opposition.
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According to FNV union rep Hans Walthie, “You can’t just fire Dutch workers,” he said, adding that Tesla would need to negotiate with a labor union on terms for any departure.
Tesla CEO Elon Musk had stated in an email sent on Tuesday that all Tesla employees must work a minimum of 40 hours per week in the office, effectively banning any remote work. “If you don’t show up, we will assume you have resigned,” he said.
The return-to-office memo, according to Jason Stomel, the founder of tech talent agency Cadre, could be a way to entice employees to quit.
It’s cheaper for Tesla because no severance is required because Elon Musk “knows there’s a percentage of workers who are just not going to come back.” In recent comments, Elon Musk has repeatedly alluded to the possibility of a recession.
He said, while speaking remotely to a conference in Miami Beach in mid-May, “I think we are probably in a recession and that recession will get worse.” For more such updates do follow us only on leedaily.com
