Tesla Cuts 9% Of Its Staff: What Does This Mean for the Company?

Tesla has been up and down throughout 2018, with allegations ranging from poor safety procedures to anti-union activity. Recently, Tesla let go of 3,000 employees, which is the largest layoff yet for the company. This has thrown the company into another round of criticism and scrutiny.

The media has been sending mixed messages about Elon Musk’s staff. On June 13th, 2018, Bloomberg published “Fired Tesla Workers Still Love Elon Musk.” In it, they referenced a number of positive tweets, including, “Thanks for the opportunity, Elon! Eye on the mission. Will always be proud to say I worked for Tesla.” A glowing endorsement considering the company’s recent reputation.

On the same day, The Guardian posted a very different article: “Tesla workers say they pay the price for Elon’s big promises.” Though it was published during the time of the layoffs, it was focused on the company’s track record regarding injuries.

“As a Tesla employee, I am really ashamed when my CEO is lying the public,” one worker said.

Employees appeared to indicate that many of the statements that Elon Musk has made are simply wrong or unachievable; that he is a dreamer who isn’t reporting on reality.

Of course, different employees have different opinions — but this does show that the undercurrent at Tesla is mixed. Some employees feel honored to be a part of Elon’s vision, while others criticize Elon’s vision as being too hopeful — and potentially not realistic.

While others may not be betting on Tesla, Elon certainly is. Musk purchased another 72,500 shares of his own company on June 13th, at a cost of approximately $25 million. Musk now owns about 19% of Tesla, though he did decline to comment regarding his purchasing. He purchased the Tesla shares when they fell between $342 and $347 a share. Musk made these purchases after the announcement that Tesla would be laying off 9% of its employees.

Tesla’s shares rose about 18% since the beginning of June, even though there were already skeptics among the analysts. It’s the numbers that many investors are concerned about: that Elon could be promising more than he can deliver. At the same time, many investors seem to have some of the same philosophy as Elon’s employees: that they want to support someone who is willing to dream big.

It is the numbers that have ultimately led to the layoffs for Tesla. The company’s layoffs are part of a bid on its own behalf to drive profitability. In fact, some investors may see the layoffs as a good sign: an indication that Elon is paying attention, and that he is attempting to create a profitable business as well as an innovative one. Not only has Tesla not made a profit in the fifteen years it has existed, but it posted $700 million in quarterly losses this year.

Tesla has been committed to changing and redefining the automobile industry, but these changes show a renewed concern for profit and for making a solid business. In the past, Elon has been criticized for being more focused on his ideas than on profit; this is reflected in his mysterious “Boring Company” and the fact that he sold consumer flamethrowers earlier this year.

At the same time, there may still be concerns regarding Tesla’s ultimate direction, and whether the company is going to be able to be profitable. Cutting staff is one area in which the company can improve its profits, but if its safety standards remain lax, it may experience blow back in other areas — this is especially true if the company is now going to be operating understaffed.

Tesla has come under fire for its company culture and its anti-union activity, and either of these things could prove to be bad news for the company’s stock valuation in the future. As of June 13th, 2018, the company’s stock hovered at around $344.78 — off from its high of $383.45 in June 2017, but still recovered from its dramatic low of $266.13 on March 29th of 2018. What comes next is likely going to depend on Elon’s plans for the future, and whether profitability is truly going to become a central goal for the company.

Regards,

Ethan Warrick
Editor
Wealth Authority


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