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Elon Musk targets white-collar Tesla staff, a test case of Twitter plans

In an email to executives, the billionaire CEO announced layoffs of 10 percent of salaried staff, saying he has a ‘super bad feeling’ about the economy

Tesla CEO Elon Musk wants to cut 10 percent of salaried jobs at the EV maker, according to an email he sent to executives and obtained by Reuters, and a subsequent message to company staff. (David Zalubowski/AP)
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Elon Musk is taking aim at Tesla’s white-collar workforce, leaving some with a foreboding sense of what’s to come as the world’s richest person simultaneously pursues ownership of Twitter, promising financial discipline.

The Tesla CEO has a “super bad feeling” about the economy and wants to cut 10 percent of the electric vehicle maker’s salaried jobs and freeze hiring, according to an email he sent to executives, and a subsequent memo to workers Friday viewed by The Washington Post.

Musk’s initial email, obtained by Reuters, was sent Thursday under the title, “pause all hiring worldwide.” In the email, Musk told executives he planned to shed one-tenth of Tesla’s workforce. His later email clarified the cuts would target Tesla’s white-collar workforce.

Musk advised all workers, “Tesla will be reducing salaried headcount by 10% as we have become overstaffed in many areas.”

He said the reduction would not affect those building cars or battery packs, or installing solar systems.

It comes just days after Musk declared “remote work is no longer acceptable” and ordered employees at both Tesla and his rocket company SpaceX to return to the office “at least” 40 hours a week or find a new place to work. The attacks on remote work mirrored opinions he expressed about Twitter, the highly influential social media site he is aiming to take private, which had been noted for its relaxed environment and flexibility of work arrangements.

Musk launched a poll in April asking in jest whether Twitter’s headquarters should be turned into a homeless shelter “since no one shows up anyway” — a clear shot at the company’s indefinite remote work policy. And a pitch deck from a group seeking to raise money for his Twitter bid said Musk was aiming to reduce “head count and costs across a bloated organization.”

Tesla has been under financial pressure as a result of Musk’s pursuit of Twitter, after the CEO committed more than $33 billion of his wealth — much of it tied to Tesla stock — to the ownership bid. Tesla’s stock has shed around $400 billion in value since his interest became public. The layoffs and crackdown on flexibility were seen among some analysts as an effort to project financial discipline, which would buffer the stock.

But Musk’s layoff messages also echoed recession fears voiced by the likes of JPMorgan Chase CEO Jamie Dimon, who has gone from forecasting economic storm clouds to “a hurricane,” commenting this week that the economy has become “distorted” by inflation.

Report: Tesla used PR firm to track workers on Facebook during 2017 union push

Some at the company felt the dual pressures of Musk’s return-to-the-office mandate and the looming layoffs.

“I think people are sweating,” one Tesla worker, speaking on the condition of anonymity over concerns about retaliation, told The Post.

Signs of strength remain for the economy more broadly: The country added 390,000 jobs in May, according to data released Friday by the Labor Department, leaving the unemployment rate unchanged at 3.6 percent. In all, U.S. employers have added more than 6.5 million jobs in the past year, with many of those gains concentrated in industries such as manufacturing, hospitality and transportation that are racing to keep up with booming demand.

But for the tech sector — which at times seemed immune to the pressures that weighed on other businesses during the pandemic — the outlook has become more challenging, fast: The industry shed more than 15,000 workers in May, a level not seen since the early days of the pandemic, according to Layoffs.fyi, which has been tracking tech job losses since March 2020.

Most are feeling the effects of surging inflation, the war in Ukraine and a checkered recovery: Hiring freezes have been announced by Silicon Valley giants like Twitter and Meta, while Netflix, Salesforce, Robinhood and PayPal are among dozens of companies that have pared back head counts in recent weeks, as have smaller but well-known outfits like Noom and Carvana.

Tesla reported record financial figures in the first quarter of 2022, beating expectations with its earnings and posting nearly $18.8 billion in revenue, even as supply chain disruptions and China’s tough covid policies weighed on production and deliveries. The layoff announcement preempted what are expected to be tough second quarter results, after Tesla’s Shanghai production lines were stalled because of China’s covid crackdown.

The Austin-based EV maker employs nearly 100,000 worldwide, according to Securities and Exchange Commission filings. As of Friday, it had 5,000 job postings on LinkedIn, from electricians and paralegals to engineers and factory staff.

Tesla has turned to layoffs before, trimming head counts by 7 percent in 2019 and 9 percent in 2018. It also cut salaries and furloughed employees early in the pandemic.

Unemployment rate stays steady at pandemic low of 3.6 percent

Musk’s hard-driving policies on remote work fly in the face of the workplace culture at social media company Twitter, which the billionaire is working to buy for about $44 billion.

The Twitter deal is expected to close later this year, and already employee tensions are running high about the coming leadership change.

Musk’s announcement decrying remote work wouldn’t be the first time Tesla has clamped down on covid-related work arrangements in a way that produced attrition. Tesla told workers in 2020 that they could stay home without punishment over fear of covid risks, but it later sent termination notices to those same workers for failure to return to the job. Some ended up leaving the company over the lack of flexibility on covid.

Dan Ives, managing director at Wedbush Securities, said that the “radio silence” over the fate of Musk’s acquisition of Twitter remains “the elephant in the room.”

“That could be other shoe to drop as Musk navigates the current backdrop, with the bot issue still unresolved in the Twitter deal pause.”

Tesla’s regulatory pressures have the potential to add further strain.

The National Highway Traffic Safety Administration has inquired about reports of “phantom braking” in Tesla vehicles, which were reported by The Post in February. Following The Post’s report, hundreds of complaints of the phenomenon — where the cars suddenly halt for imagined hazards — flooded the agency’s website. The NHTSA opened a probe into the issue soon after, and a letter from May that was recently made public showed the agency had received 758 reports of so-called “unexpected brake activation” in Tesla Model 3 and Model Y vehicles from the 2021 and 2022 model years.

The letter asked Tesla for detailed information on the incidents, including consumer complaints, data logs and footage, and if necessary, crash reports.

Tesla shares are down sharply this year amid a broader tech sell-off that has pushed the Nasdaq index into a bear market and collectively wiped nearly $3 trillion off the values of the five biggest tech companies, Amazon, Apple, Microsoft, Facebook and Google. Other stocks that were once pandemic darlings have nosedived: Zoom is down 40 percent year to date, while Peloton is off more than 63 percent and Netflix 66 percent.

Tesla’s stock slumped by 9 percent in Friday’s trading, and it was down around 30 percent since December.

Some analysts cautioned against broader takeaways from the layoff announcement, saying the issue may be specific to Tesla — which hired nearly 30,000 workers last year, they said.

“In our view, Tesla likely does not need to hire any more employees to maintain its growth, and we think the plan to reduce the workforce likely shows that Tesla overhired last year,” said Seth Goldstein, senior equity analyst with the firm Morningstar, in an analyst note.

“We view 2022 as a transition year for Tesla,” Goldstein added.

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