SAN FRANCISCOElon Musk, CEO of Tesla (TSLA.O), said in emails seen by Reuters that he has a “super bad feeling” about the economy and needs to cut about 10% of Tesla’s salaried staff.
On Thursday, he sent a message to executives outlining his worries and telling them to “stop all hiring worldwide.” The bad news came two days after the billionaire told his employees to go back to work or leave. It adds to the growing number of warnings from business leaders about the dangers of a recession.
After the Reuters report came out on Friday, Tesla shares in the U.S. fell by 9%. The tech-focused Nasdaq (.IXIC) fell about 2%.
Musk told employees in another email on Friday that he was “overstaffed” in many places.
“But the hourly headcount will go up,” he said.
Musk wrote in an email seen by Reuters, “Note that this does not apply to anyone who is actually building cars, battery packs, or installing solar.”
At the end of 2021, almost 100,000 people worked for Tesla and its subsidiaries, according to the company’s annual SEC filing. It didn’t show how many people were on salary and how many were paid by the hour.
The Texas-based company was not available to talk right away.
Musk has warned in recent weeks about the risk of a recession, but his email ordering a hiring freeze and staff cuts was the most direct and high-profile message of its kind from the head of an automaker. Others have talked about sky-high demand.
“Elon Musk knows more about the world economy than anyone else. We think that if he sent a message, it would have a lot of weight “In a report, Adam Jonas, an analyst at Morgan Stanley, said.
Shanghai Lockdown
So far, demand for Tesla cars and other electric vehicles (EV) has stayed strong, and many traditional signs of a slowdown, like increasing dealer inventories and incentives in the US, have not happened.
But COVID-19 lockdowns have made it hard for Tesla to get production back up and running at its Shanghai factory.
It is always better to start austerity measures when times are good than when times are bad. I think the statements are a warning and a way to be safe, “said Frank Schwope, an analyst at NordLB in Hanover.
Musk’s pessimistic view is similar to what executives like JPMorgan Chase & Co. CEO Jamie Dimon and Goldman Sachs President John Waldron have said recently.
This week, Dimon said, “A hurricane is right out there down the road heading our way.”
The cost of living in the U.S. has gone up because inflation is at its highest level in 40 years. The Federal Reserve has the difficult job of lowering demand enough to stop inflation without causing a recession.
It was also not clear right away how Musk’s opinion would affect his $44 billion bid for Twitter, if at all (TWTR.N). On Friday, U.S. antitrust regulators gave the deal the green light, which sent Twitter shares up 2%.
Several analysts have recently lowered their price targets for Tesla because they think it will lose production at its Shanghai plant, which is a hub for EVs going to China and going out of China.
According to company reports and data on sales in China, just over a third of Tesla’s deliveries around the world in 2021 were to China. On Thursday, Daiwa Capital Markets said that Tesla had about 32,000 orders waiting to be delivered in China, compared to 600,000 vehicles for its bigger EV competitor in that market, BYD (002594.SZ).
‘PAUSE ALL HIRING‘
Before Musk’s warning, Tesla had about 5,000 job postings on LinkedIn, including sales jobs in Tokyo, engineering jobs at its new Berlin gigafactory, and deep learning scientist jobs in Palo Alto. It had a hiring event planned for June 9 on its WeChat channel for people in Shanghai.
In Germany, Musk’s request that employees go back to work has already been met with resistance.
A union leader said that his plan to cut jobs would be met with opposition in the Netherlands, where Tesla’s European headquarters are located.
“You can’t just fire Dutch workers,” said Hans Walthie, a spokesman for the FNV union. He added that Tesla would have to work out the terms of any departures with a labour union.
Musk said in an email on Tuesday that Tesla workers had to be in the office at least 40 hours a week. This made it impossible for them to work from home. “If you don’t show up, we’ll think you quit,” he told her.
The return-to-office memo could be a way to get people to leave, said Jason Stomel, who started the tech talent agency Cadre.
“(Musk) knows there are some workers who just won’t come back,” which would save Tesla money because they wouldn’t have to pay them severance.
Musk has talked a lot lately about the possibility of a recession.
In mid-May, he spoke from afar at a conference in Miami Beach. He said, “I think we’re probably in a recession, and that recession will get worse.”
