Tesla CEO Elon Musk has a “super bad feeling” about the economy and the need to cut about 10% of the salaried workforce at the electric carmaker, he said in an email seen by Reuters.
A message sent to officials on Thursday expressed their concerns and asked them to “stop all appointments around the world”. The grim outlook came two days after the billionaire told employees to return or leave the workplace and joined a growing chorus of warnings from business leaders about the risks of a recession.
Tesla shares fell 9% in US trading on Friday after a Reuters report. The tech-heavy Nasdaq was down about 2%.
In another email to employees on Friday, Musk said Tesla would cut the number of salaried employees by 10%, as it has become “excessively staffed in many areas.” But “hourly headcount will increase,” he said.
“Note, this doesn’t really apply to anyone building cars, battery packs, or installing solar,” Musk wrote in an email seen by Reuters.
Its annual SEC filing shows Tesla and its subsidiaries employed about 100,000 people at the end of 2021. It did not break out the number of salaried and hourly workers.
The Texas-based company was not immediately available for comment.
Musk has warned about the risks of a recession in recent weeks, but his email was the most direct and high-profile message of its kind from the head of an automaker, with others describing sky-high demand.
“Elon Musk has a uniquely informed insight into the global economy. We believe one of his messages will have high credibility,” Morgan Stanley analyst Adam Jonas said in a report.
shanghai lockdown
So far, demand for Tesla cars and other electric vehicles (EVs) remains strong and many traditional indicators of a slowdown – including growing dealer inventory and incentives in the United States – have not materialised.
But Tesla has struggled to restart production at its Shanghai factory as the COVID-19 lockdown forced costly outages.
“It is always better to introduce austerity measures in good times than in bad times. I view the statements as a warning and a precautionary measure,” said Hannover-based NordLB analyst Frank Schwop.
Musk’s gloomy outlook echoes recent comments from executives including JPMorgan Chase & Co CEO Jamie Dimon and Goldman Sachs chairman John Waldron.
“There’s a storm right down the road coming our way,” Dimon said this week.
Inflation in the United States is hovering at a 40-year high and has buoyed the cost of living for Americans, while the Federal Reserve has struggled to reduce demand enough to contain inflation while not causing a recession. have to face the task.
It was also not immediately clear what the implications, if any, of Musk’s idea for his $44 billion bid for Twitter would be. US antitrust regulators cleared the way for the deal on Friday, sending Twitter shares up 2%.
Several analysts have recently cut price targets for Tesla, predicting lost production at its Shanghai plant, which is the hub supplying EVs to China and for exports.
China accounted for just over a third of Tesla’s global deliveries in 2021, according to company disclosures and data released on sales there. On Thursday, Daiwa Capital Markets estimated that Tesla had about 32,000 orders awaiting delivery in China, compared with 600,000 vehicles for BYD, its larger EV rival in that market.
‘Stop all hiring’
Before Musk’s warning, Tesla had about 5,000 job postings on LinkedIn from sales in Tokyo and engineers at its new Berlin Gigafactory to deep learning scientists in Palo Alto. It had scheduled an online hiring event for Shanghai on June 9 on its WeChat channel.
Musk’s demand that employees return to the office has already faced pushback in Germany. And his plan to cut jobs will face resistance in the Netherlands, where Tesla has its European headquarters, a union leader said.
FNV union spokesman Hans Walthi said, “You can’t just fire Dutch workers, adding Tesla would have to negotiate with a labor union for any departure.
Musk said in an email Tuesday that Tesla employees are required to be in the office at least 40 hours per week, closing the door on any remote work. “If you don’t come, we will assume that you have resigned,” he said.
Jason Stommel, founder of tech talent agency Cadre, said return-to-office memos could be a way for people to leave.
“(Musk) knows there’s a percentage of workers who just aren’t going to come back,” he said, adding that would be cheaper for Tesla because no severance would be needed.
Musk has repeatedly mentioned the risk of a recession in recent remarks.
Addressing a conference remotely in mid-May in Miami Beach, he said: “I think we’re probably in a recession and this downturn will get worse.”
(Reporting by Hyunju Jin; John O’Donnell, Joo-Min Park, Zoey Zhang, Toby Sterling and additional reporting by Sarah Moreland and Nivedita Balu; Editing by John Stonestreet, Mark Potter, Nick Ziminsky and Lisa Shumaker)
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