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article imageTesla cuts workforce by 9 percent in reorganization effort

By Karen Graham     Jun 13, 2018 in Business
Tesla CEO Elon Musk told employees on Tuesday the company plans to make significant job cuts as part of a comprehensive restructuring effort.
"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," Musk said in an email to employees on Tuesday, according to CNBC. "I also want to emphasize that we are making this hard decision now so that we never have to do this again."
A Tesla spokesperson said it had started notifying employees on Tuesday and would continue to do so throughout the week, reducing the workforce back to about 37,000 employees, in line with the workforce at the end of 2017. Tesla has added around 8,000 employees since the start of the year and currently employs approximately 46,000 workers.
Musk also mentioned in the email that Tesla is still hiring “hourly and salaried positions” for Model 3 and future programs.
The reorganization will shed about 4,100 jobs, most of them salaried positions. “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," the email read.
In an email sent to employees on May 14, CEO Elon Musk announced a "thorough reorganization" of the company. "To ensure that Tesla is well prepared for the future, we have been undertaking a thorough reorganization of our company. As part of the reorg, we are flattening the management structure to improve communication, combining functions where sensible and trimming activities that are not vital to the success of our mission."
So yesterday's announcement is really not that much of a surprise to those of us following the company. And it is also indicative of good management looking toward the future.
In the Tuesday email, Musk also wrote the company would not renew its residential contract with Home Depot "in order to focus our efforts on selling solar power in Tesla stores and online."
Tesla is maturing and making profit a priority
CFRA analyst Efraim Levy sees the news from Tesla as a sign the company is maturing and prioritizing profitability. “A nine percent job cut is a good number and I don’t think there will be more job cuts in the near term," he said, according to Reuters.
"There is a normal ebb and flow of hiring and firing in a business," he said. "Nine percent is a big chunk to do at once, but there comes a time when a company grows up and they have to cut out the fat to become more efficient."
It has been a rocky few months for the electric car company, that included criticism for missing production targets and several accidents, including fatalities involving Tesla's AutoPilot, the company's advanced driver assistance system.
But it was the First-Quarter earnings conference call that brought things to a head. Musk appeared to be "combative toward Wall Street and the press," according to CNBC,
However, perhaps all this speculation into Musk's attitude toward the market and the press is all part of that maturing process. It was reassuring to see Tesla's backers were sticking close behind Musk after the annual shareholder's meeting, and even though shares in the company at the start of April had fallen by around 35 percent from a peak hit last September - Things are looking up.
Shares in the company rose as much as 7 percent on Tuesday, although they fell back to stand just 3 percent higher on the day after Musk’s announcement.
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