Tesla is laying off 9% of its total staff across the company. The layoffs are limited largely to salaried employees, and won't impact production rates of the Tesla Model 3, the company said.
In an email to staff on Tuesday, Tesla CEO Elon Musk said the cuts were driven by “the need to reduce costs and become profitable.” In the email, Musk acknowledged that “Tesla has never made an annual profit in the almost 15 years since we have existed.”
"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," Musk wrote.
Decisions of which employees to let go were determined "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." In his email, Musk also noted that the company was ending a sales partnership with Home Depot, where Tesla placed salespeople at retail locations of the home improvement store to sell its solar products.
One Telsa employee who spoke with BuzzFeed News under the condition of anonymity said that last Friday, company leaders told home energy unit staff of an all-hands meeting on Tuesday, and told them to block off a four-hour period starting at 9 a.m. PT. On Monday, some sales employees were also told to complete an online test about Tesla vehicles before midnight, though it was unclear why at the time.
The employee, who works at a Home Depot location, told BuzzFeed News the four-hour meeting was reduced to a nine-minute conference call to notify employees of the expected workforce cuts. During the call, Home Depot-based workers were told that some who passed the vehicles sales test will move to Tesla automobile dealerships and that they would find out on Thursday if they had made the cut.
Still, Tuesday’s call left more questions than answers for the employee, who said Musk’s statements “don’t really add up.” In his email, the billionaire chief executive noted that "the majority of Tesla employees working at Home Depot will be offered the opportunity to move over to Tesla retail locations."
“Elon said that it would be 9% of mostly salaried people, but the logic of that doesn’t make sense. There are hundreds of [non-salaried sales people] in Home Depots. If Home Depot is shutting down, I don’t know how many possibly could be absorbed into Tesla stores," the employee told BuzzFeed News.
Tesla did not immediately respond to questions on how it plans to handle transitions of Home Depot-based employees.
Tesla previously let go a large number of employees in October 2017, which the company said at the time were related to performance issues.
Some of those employees have accused the company of wrongfully terminating them because of their involvement in an ongoing labor organizing campaign at Tesla's Fremont, California, car factory. Tesla is currently facing those and other charges of unfair labor practices in a trial in front of the National Labor Relations Board.
Here's the full email Musk wrote to staff on Tuesday:
From: Elon Musk
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've 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’ve 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.
This story has been updated to include comments from a Tesla employee.