Tesla to cut workforce by 9%; vows to keep Model-3 ramp up intact

Tesla (TSLA) has embarked on a workforce reduction as part of the restructuring program announced by CEO Elon Musk recently to lift the loss-making electric car maker to profitability. The company-wide job cut is expected to affect nearly 9% of Tesla’s 46,000-odd employees.

According to sources, the initial round of layoffs, which began at the beginning of this week, is limited to salaried employees. That means production staffs will be excluded from the process to ensure that the production of Tesla’s Model-3 compact sedan is not affected. The company currently expects to achieve its production target of 5,000 units per week by June-end, and to roll out the car for a test drive by the end of July.

An e-mail message tweeted by Musk stated, “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.” He also assured that the affected workers will be adequately compensated through significant salary and stock vesting.

Meanwhile, an analyst firm that surveyed around 20 Tesla dealers has predicted that deliveries of Model 3 will increase by 50% to 30,000 in the second quarter from the current 20,000. In what seems to be a related incident, a Tesla employee was reportedly asked to leave its factory by security guards on Monday after he tried to distribute leaflets among the other employees with the intention of forming a union.

Musk has been planning a comprehensive reorganization of Tesla in order to keep pace with rivals in the highly competitive sector. Under the program, which includes a major management reshuffle, the company’s various departments will be streamlined. In his controversial earnings call earlier this year, the billionaire businessman had predicted the company would become profitable and cash flow positive in the third quarter.

However, the market remains skeptical about the company, which recorded losses consistently in the last 15 years of its existence, being able to recover from the red and turnaround its cash position in such a short period.

The company-wide job cut is expected to affect nearly 9% of Tesla’s 46,000-odd employees.

Last month, Musk in a statement had said Tesla was “flattening management structure”, leaving the stakeholders to speculate what exactly he was trying to convey, at a time when several senior executives stepped down due to various reasons.

In the first quarter, Tesla recorded an adjusted loss of $3.35 per share on revenue of $3.41 billion, broadly in line with analysts’ forecast. Shares of the company, which gained more than 6% since the beginning of the year, closed Tuesday’s regular session up 3.2%.