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Elon Musk Wants to Cut Around 10% of Tesla's Global Workforce, Blames Economic Uncertainty

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【Summary】Tesla Chief Executive Elon Musk announced that he wants to reduce Tesla’s workforce by 10%, equal to roughly 10,000 jobs. Musk cites economic uncertainty for the plans to reduce Tesla’s workforce and wrote that he has a "super bad feeling" about the economy in the email to executives.

Eric Walz    Jun 03, 2022 9:30 AM PT
Elon Musk Wants to Cut Around 10% of Tesla's Global Workforce, Blames Economic Uncertainty

Tesla Chief Executive Elon Musk made headlines this week when he ordered all remote Tesla employees to return to their offices or quit the company. The order surprised many people both inside and outside of the company that have come to embrace a more flexible and hybrid environment. 

Now Musk announced that he wants to reduce Tesla's workforce by 10%, equal to roughly 10,000 jobs. The plans were first reported by Reuters, which obtained a copy of the email to employees.

Tesla employed around 100,000 people at the end of 2021, its annual SEC filing showed.

Musk blames economic uncertainty for the plans to reduce Tesla's workforce by 10%, and wrote that he has a "super bad feeling" about the economy in the email to executives. The planned cuts in Tesla's workforce will only be for Tesla's white collar jobs. 

Hourly employees building the company's electric cars in Austin, TX and California, as well as those assembling battery packs and solar panels will not be affected. In fact, Musk said that Tesla will hire even more hourly employees to help ramp up vehicle production.

The message, sent to Tesla employees on Thursday also states that Tesla plans to hold off on all hiring worldwide, with the exception of its hourly manufacturing workforce.

Tesla is the world's most valuable car company, and Musk's public comments about a gloomy economic outlook are surprising from such a high-profile company leader.

Musk's prediction that the economy will further retract mirrors the opinion of top financial executives, including JPMorgan Chase & Co CEO Jamie Dimon who said this week that a "A hurricane is right out there down the road coming our way."

With the record high gas prices in the country, which don't necessarily affect Tesla as an electric automaker, combined with soaring inflation, Musk's prediction that the economy will further pullback is understandable for many Americans.

Inflation in the United States is at 40-year highs and has caused a jump in the cost of living for Americans, with just about everything costing more. In addition, the Federal Reserve faces the difficult balancing act of raising interest rates to curb inflation without causing a worsening recession.

Musk's "super bad feeling" about the U.S. economy, might be easier to take for him personally, since he's the world's wealthiest individual with a net worth of over $215 billion. But for Tesla employees that might lose their jobs, his statement carries more weight.

In the email sent to Tesla employees on Tuesday, Musk had said that employees were required to be in the office for a minimum of 40 hours per week, closing the door on any remote work. "If you don't show up, we will assume you have resigned," he wrote.

Tesla's margins are also being affected by the production shutdown at Tesla's factory in Shanghai. The China auto market is the world's biggest and is roughly 30% of Tesla's global sales. The electric automaker was forced to shut its factory amid covid lockdowns across China.

As reported by Reuters, Daiwa Capital Markets estimated Tesla had about 32,000 orders awaiting delivery in China, which could significantly lower its profits in the second quarter. 

Tesla stock price is down over 40% (or $488 a share) since the start of the new year, and Musk's plans to reduce Tesla's workforce caused it to slip another 9% on Friday.

However, Tesla's sinking stock price can also be attributed to Musk's offer to purchase social media platform Twitter for $44 billion, which was accepted by Twitter board. The whole Twitter saga has been a significant distraction for Musk and investors in Tesla.

But Musk is apparently getting cold feet over the deal, as well as finding a way to pay for the acquisition without using too much of his own cash. Last month, Musk tweeted that his $44 billion deal to purchase Twitter was "temporarily on hold". He said the reason was that he was waiting for data on the number of "fake accounts" or bots on the platform.

Since Musk's plans to buy Twitter surfaced in April, Tesla stock price has fallen by 30% from $1,145 to $708, erasing roughly $400 billion in market cap. This could be one of the reasons that Musk is looking to reduce Tesla's workforce and further cut costs.

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