20 April 2019
Tesla had to make a 'difficult, but necessary' decision to cut the workforce, CEO Elon Musk said. Photo: Reuters
Tesla had to make a 'difficult, but necessary' decision to cut the workforce, CEO Elon Musk said. Photo: Reuters

Tesla to cut 9% of workforce as it seeks to stem losses

Electric carmaker Tesla is cutting several thousand jobs as it seeks to reduce costs and become profitable without endangering the critical production ramp-up for its Model 3 sedan.

In an email he said had been sent to staff, CEO Elon Musk said on Tuesday that the cuts were part of a simplification of Tesla’s management structure promised last month, Reuters reports.

“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.”

Tesla said it began notifying impacted workers on Tuesday and will continue to do so throughout the week.

A spokesman was quoted as saying that the move will reduce overall employment back to around 37,000 – roughly in line with numbers at the end of last year.

Tesla has been burning through cash 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, Reuters noted.

The company has been trying to hit a 5,000 per week production target of its Model 3 sedans after facing initial production hiccups.

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

Shares rose as much as 7 percent after the job cut announcement before paring some of the gains.

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

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