Tesla to lay off 9% of workers as part of restructuring plan
The company estimates that it has more than 42,500 employees around the world
U.S. electric car giant Tesla is laying off nine per cent of its global workforce, it announced on Tuesday.
The company, based in Palo Alto, Calif., said the move was part of its organizational restructuring announced by CEO Elon Musk last month.
"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 nine per cent of our colleagues across the company," Musk said in an email to employees.
"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."
Tesla told CBC News that it has more than 42,500 employees around the world.
Last week, Musk had announced that the company would "quite likely" be able to build 5,000 Model 3 vehicles a week by the end of June after facing production setbacks.
In the email to employees, Musk said that Tesla's rapid growth over the past several years has resulted in some duplication of roles and job functions.
"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," he said.
"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."
In May, Tesla posted its biggest-ever quarterly loss when it announced first quarter results and then it lost $2 billion in market capitalization after Musk started cutting analysts' questions short during an earnings conference call.
Daniel Ives, head of technology research at GBH Insights said the job cuts were the "right medicine" for Tesla as the company looks to lower the rate at which it's burning through cash, and for a more efficient business structure.
"This is a move that will be viewed positively by [investors and analysts] after many months of frustration," he told CBC News. "It finally feels like Tesla and Musk are turning the corner on its much-discussed cash burn situation."
Partnership with Home Depot
Musk also said his company will not renew its residential sales agreement with retailer Home Depot in order to focus 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," Musk said.
The company had only announced its partnership with Home Depot to sell solar panels and batteries in February.
Musk added that Tesla will be providing "significant" salary and stock vesting (proportionate to length of service) to the employees being let go.
Shares of Telsa listed in New York fell in the afternoon after news of the layoffs, but still closed up 3.2 per cent. It was up as much as seven per cent earlier in the day.