Tesla employees received mail at 1 am for meeting before lay-off

Elon Musk-led Tesla had on Tuesday announced its plan to cut 9% of its total workforce to become profitable.

Tesla employees received mail at 1 am for meeting before lay-off
Image Credit: Reuters

Palo Alto: Several employees of Tesla Inc, the American multinational corporation that specializes in electric vehicles, energy storage and solar panel manufacturing, had received an email for an important meeting before the lay-off was announced by the company.

A former employee of the company, based in Palo Alto, California, revealed that her team received an email at 1 am, which asked them to clear four hours in their day's schedule for a video conference. 

Later, during the conference, about 250 employees were asked to leave, despite several staff members meeting their targets, she claimed.

Elon Musk-led Tesla had on Tuesday announced its plan to cut 9% of its total workforce to become profitable.

The company said that it seeks to reduce costs and become profitable without endangering the critical production ramp-up for its Model 3 sedan.

In an email, billionaire Chief Executive Elon Musk said that the cuts were part of a simplification of Tesla’s management structure promised 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 9 percent of our colleagues across the company,” the email read.

“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,” it said.

Tesla has been trying to hit a 5,000 per week production target of its Model 3 sedans after facing initial production hiccups. Last week, Musk said the carmaker should achieve its target by the end of June.

Its shares rose as much as 7 percent and were last up 3.6 percent at $344.18.

Efraim Levy, an analyst at CFRA Research, said that the lay-offs mean there likely would possibly be no more job cuts in the near-term in the company, adding that Tesla will likely raise capital early in 2019.

Tesla has been facing huge cash crunch as it continues to spend on its assembly line and prepares for new investments on projects such as the Model Y crossover and its Gigafactory.

Free cash flow, a key metric of financial health, widened to negative $1 billion in the first quarter from negative $277 million in the fourth quarter, excluding costs of systems for its solar business.

Several Wall Street analysts anticipate a capital raise this year despite Musk’s statements that it will not be necessary due to profitability and positive cash flow in the third or fourth quarters.

Tesla said it began notifying impacted workers on Tuesday and would continue to do so throughout the week. A spokesman also said it would reduce overall employment back to around 37,000 - roughly in line with numbers at the end of last year.

Musk also said that Tesla had decided not to renew a residential sales agreement with Home Depot (HD.N), and would focus instead on selling its solar products through its own stores and website. 

The company will seek to re-employ most Tesla employees at Home Depot stores at its own locations.

Musk had told employees in May that the company was undergoing a “thorough reorganization” as it contends with production problems, senior staff departures and recent crashes involving its electric cars.

At the start of April, the company’s shares had fallen by around 35 percent from a peak hit last September but signs that it is on course to meet an output target of Model 3 cars have wiped out almost all of this year’s losses.

(With Reuters inputs)

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