Exclusive: Musk says the economy is “super bad,” and he needs to cut 10% of Tesla’s jobs.
FRANCISCO (Reuters) – Elon Musk, CEO of Tesla (NASDAQ: TSLA), said in an email seen by Reuters that he has a “super bad feeling” about the economy and that the electric car company needs to cut about 10% of its jobs.
The message, which was sent on Thursday and said, “Stop all hiring worldwide,” came two days after the billionaire told employees to go back to work or leave. It is the latest business leader to warn of the dangers of a recession.
At the end of 2021, almost 100,000 people worked for Tesla and its subsidiaries, according to the company’s annual SEC filing.
The company could not be reached right away for comment.
On Friday, before the stock market opened in the U.S., Tesla shares fell by almost 3 percent, and after a report from Reuters, its stock in Frankfurt fell by 3.6 percent. Futures on the Nasdaq in the United States fell and were trading 0.6 percent lower.
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 public message of its kind from the head of an automaker.
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.
Carsten Brzeski, global head of macroeconomic research at the Dutch bank ING, said, “Many people feel the same way as Musk.” “But we’re not talking about a worldwide economic downturn. We think that the world economy will slow down by the end of the year. The United States will slow down, but China and Europe will not get better. “
Musk’s pessimistic view is similar to what CEOs 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.
Forbes says that Musk is the richest person in the world, but in the short email seen by Reuters, he didn’t explain why he had a “super bad feeling” about the economy.
It wasn’t clear right away what, if any, effect Musk’s opinion would have on his $44 billion bid for Twitter (NYSE:TWTR).
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 BYD, which is a bigger EV competitor in that market.
In a tweet, Daniel Ives, an analyst at Wedbush Securities, said in a tweet that it seemed like Musk and Tesla were “trying to get ahead of a slower delivery ramp this year and keep margins before an economic slowdown.”
Tesla’s sales graph (https://graphics.reuters.com/AUTOS-TESLA/movanzdrwpa/chart.png)
‘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 the work council.
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.
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.”
When asked on Twitter at the end of May if a recession was coming, Musk replied: “Yes, but it’s a good thing that this is true.” For too long, too many fools have been making money. Some businesses need to go out of business. “
GRAPHIC: Tesla’s global employment Tesla’s global employment (https://graphics.reuters.com/TESLA-JOB/zjpqkggxxpx/chart.png)
A drop in demand has caused some companies to cut jobs or slow or stop hiring. Netflix (NASDAQ:NFLX) said last month that it had fired about 150 people, most of whom were in the United States. In February, Peloton (NASDAQ:PTON) said it would cut 2,800 jobs. Tech companies like Uber (NYSE:UBER) and Meta Platforms have cut back on hiring.
Tesla CEO Elon Musk announced in June 2018 that the company would cut 9% of its workforce because it was losing money and struggling to produce more Model 3 electric sedans. However, data from its SEC filings showed that the reductions were more than made up for by hiring by the end of the year.
