Tesla CEO Elon Musk told employees this week the company plans to make significant job cuts as part of a comprehensive restructuring effort.
"[W]e have made the difficult decision to let go of approximately 9% of our colleagues across the company," Musk wrote in an email to all staff. "These cuts were almost entirely made from our salaried population and no production associates were included, so this will not affect our ability to reach Model 3 production targets in the coming months."
Last month, Musk warned employees in a separate letter obtained by Electrek that Tesla is undertaking a "reorg" that would flatten the management structure and trim activities "that are not vital to the success of our mission." This week's layoff announcement sheds more light on that strategy, as Tesla strives to achieve profitability by the end of the year.
Musk acknowledged the job cuts in a tweet today, shortly after news leaked to the media.
Difficult, but necessary Tesla reorg underway. My email to the company has already leaked to media. Here it is unfiltered: pic.twitter.com/4LToWoxScx— Elon Musk (@elonmusk) June 12, 2018
Layoffs reportedly began on Monday and are expected to continue throughout the week. Tesla currently employs approximately 46,000 workers, with roughly 8,000 positions added since the start of the year, according to CNBC. Through the reorganization, Tesla could shed around 4,100 jobs.
In 2016, following Tesla's acquisition of SolarCity, the company let go of around 20 percent of the solar firm's workforce.
Musk thanked everyone departing Tesla this week for their hard work, and thanked those remaining in advance "for the difficult job that remains ahead."
At the automaker's 2018 annual shareholder meeting last week, Musk said he's confident the company can start producing 5,000 Model 3s per week by the end of this month. The automaker's weekly meanufacturing rates topped out at 2,270 units in April.
The success of Tesla's lower-priced electric vehicle is critical to the success of the company overall. Wait times for the Model 3 ballooned at the company struggled through "production hell" last year. On a May conference call, financial analysts asked Musk tough questions about the company's rapid cash burn rate and need to raise capital, which led to a heated exchange where the CEO criticized Wall Street analysts and turned instead to questions from a YouTube host.
Also contained in Musk's letter to employees, the CEO announced that Tesla would not renew its residential solar sales agreement with Home Depot in order to focus on selling solar power through Tesla stores and online. Employees working at Home Depot stores will have the option of moving to Tesla locations.
Tesla's solar deployments have slowed over the past few quarters, as the company restructures and shifts away from door-to-door sales. But management said it expects solar sales to pick back up as it works through a backlog of Powerwall home battery orders.
Musk ended his note to workers this week by underscoring the societal value of Tesla's hard work.
"[D]espite our tiny size, Tesla has already played a major role in moving the auto industry towards sustainable electric transport and moving the energy industry towards sustainable power generation and storage," he said. "We must continue to drive that forward for the good of the world."
Below is the full text of Musk's email to employees.
From: Elon Musk
Sent: Tuesday, June 12, 2018 10:27 AM
Subject: Reorg Update
As described previously, we are conducting a comprehensive organizational restructuring across our whole company. Tesla has grown and evolved rapidly over the past several years, which has resulted in some duplication of roles and some job functions that, while they made sense in the past, are difficult to justify today.
As part of this effort, and the need to reduce costs and become profitable, we have made the difficult decision to let go of approximately 9% of our colleagues across the company. These cuts were almost entirely made from our salaried population and no production associates were included, so this will not affect our ability to reach Model 3 production targets in the coming months.
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. What drives us is our mission to accelerate the world’s 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.
This week, we are informing those whose roles are impacted by this action. 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. As you know, we are also continuing to flatten our management structure to help us communicate better, eliminate bureaucracy and move faster.
In addition to this company-wide restructuring, we have decided not to renew our residential sales agreement with Home Depot in order to focus our efforts on selling solar power in Tesla stores and online. The majority of Tesla employees working at Home Depot will be offered the opportunity to move over to Tesla retail locations.
I would like to thank everyone who is departing Tesla for their hard work over the years. I’m deeply grateful for your many contributions to our mission. It is very difficult to say goodbye. In order to minimize the impact, Tesla is providing significant salary and stock vesting (proportionate to length of service) to those we are letting go.
To be clear, Tesla will still continue to hire outstanding talent in critical roles as we move forward and there is still a significant need for additional production personnel. I also want to emphasize that we are making this hard decision now so that we never have to do this again.
To those who are departing, thank you for everything you have done for Tesla and we wish you well in your future opportunities. To those remaining, I would like to thank you in advance for the difficult job that remains ahead. We are a small company in one of the toughest and most competitive industries on Earth, where just staying alive, let alone growing, is a form of victory (Tesla and Ford remain the only American car companies who haven’t gone bankrupt). Yet, despite our tiny size, Tesla has already played a major role in moving the auto industry towards sustainable electric transport and moving the energy industry towards sustainable power generation and storage. We must continue to drive that forward for the good of the world.