Tesla cuts 9 percent of workforce in bid to post profit

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Tesla is cutting 9% of its workforce as it races toward profitability, chief executive Elon Musk said Tuesday (June 12).

Electric auto maker Tesla Inc.is laying off about 3,600 workers mainly from its salaried ranks as it slashes costs in an effort to deliver on CEO Elon Musk's promise to turn a profit in the second half of the year. He noted that the cuts will not affect Tesla's ability to reach targets for producing the Model 3.

Mr Musk said, that a "difficult, but necessary" reorganisation was underway.

Tesla will notify the affected workers this week and and although an exact number of job losses has not yet been confirmed a spokesman said it would reduce overall employment back to around 37,000 - roughly in line with numbers at the end of past year.

"I don't think if Tesla becomes profitable in Q3 and Q4, that will be sustainable because of ramping up of the production". He also added that the layoffs should help reduce costs and hopefully will make the firm profitable.

Free cash flow, a key metric of financial health, widened to negative $1 billion (R13.3bn) in the first quarter from negative $277 million (R3bn) in the fourth quarter, excluding costs of systems for its solar business.

The share purchases could be a signal to employees and Wall Street that he's still optimistic about the future of Tesla. A spokesman said it would reduce overall employment back to around 37 000 - roughly in line with numbers at the end of past year.

In a Wednesday SEC filing, Tesla made public the information that Musk had purchased 72,500 shares this Tuesday and Wednesday, at weighted averages between $342.78 and $347.01. He said most Tesla employees working at Home Depot will be offered a chance to move to Tesla retail locations.

"The basic problem is that he is making the cars at not enough of a gross margin to make money", Chanos told CNBC. Musk spent about $25 million on these shares.

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