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Founder and CEO of Tesla Motors Elon Musk speaks during a media tour of the Tesla Gigafactory.
Image: Founder and CEO of Tesla Motors Elon Musk speaks during a media tour of the Tesla Gigafactory. REUTERS/James Glover II

Tesla “Company-Wide Restructuring” Leaves Thousands Unemployed

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Image: Founder and CEO of Tesla Motors Elon Musk speaks during a media tour of the Tesla Gigafactory. REUTERS/James Glover II

Tesla has announced layoffs of approximately 9 percent, or over 3,000 of its total employees.

The cuts were made as a part of a “company-wide restructuring,” said CEO Elon Musk in an email.

“Difficult, but Necessary Tesla Reorg”

Tesla CEO Elon Musk sent the company staff an email saying that around 9 percent of the employees would be laid off. The “company-wide restructuring” would be affecting more than 3,000 people. That said, it also underscored that the job cuts would not impact Tesla’s ongoing effort to boost its Model 3 sedan production.

“We made these decisions by evaluating the criticality of each position, whether certain jobs could be done more efficiently and productively, and by assessing the specific skills and abilities of each individual in the company,” said Musk’s email. “In order to minimize the impact, Tesla is providing significant salary and stock investing (proportionate to the length of service) to those we are letting go.”

Investor Pressure

Tesla has been suffering from significant pressure from its investors recently. They have been feeling the push to boost its Model 3 production. At the end of this year’s first quarter, the company had about $2.6 billion in cash. Its spending equals about $1 billion per quarter.

Though sales of the pricier Model S and Model X continue to increase with each passing quarter, Tesla is going to start seeing some profitable figures on its Model 3 if it expects to be profitable. Otherwise, it will be forced to have to raise capital – or borrow it – in the near future. This is a step that Musk has repeatedly stated would not occur in 2018.

“Given that Tesla has never made an annual profit in the almost 15 years since we have existed, profit is obviously not what motivates us,” Musk wrote. “What drives us is our mission to accelerate the worlds transition to sustainable, clean energy, but we will never achieve that mission unless we eventually demonstrate that we can be sustainably profitable. That is a valid and fair criticism of Tesla’s history to date.

Musk Warned About Upcoming Cuts

In April, Musk did warn that a company reorganization would be coming. Tesla has missed several Model 3 production target deadlines. That said, at the annual shareholder meeting earlier this month, Musk stated that production is now up to about 500 per day or 3,500 per week.

The goal is to reach 6,000 Model 3 sedans on a weekly basis. This goal was meant to be met by mid-year. That would allow the company to reach the break-even point for each of those vehicles.

Note: The opinions expressed in this article are the author's own and do not necessarily reflect the view of Alvexo on the matter.