One month after Tesla lost its head of business development who wished to “spend more time with his family”, and just weeks after the EV company’s veteran battery technology director also unexpectedly quit amid a growing senior management exodus (full list at the bottom of this article), Tesla decided to even out the ranks on the bottom as well, and fired “hundreds of workers” this week, including engineers, managers and factory workers even as the company struggles to expand its manufacturing and product line, according to the Mercury News which first reported of the mass layoffs.
Workers estimated between 400 and 700 employees have been fired, although Tesla refused to say how many employees were let go, and added that it expects employee turnover to be similar to last year’s attrition. Tesla employs about 10,000 workers at its Fremont factory; it lost $336 million in the second quarter, and burned through a record $1.16 billion in cash in Q2, or $13 million per day.
In September, Tesla announced it was cutting 63 positions at SolarCity Corp.’s Roseville, California office; the staff was dismissed after Tesla bought the company, which manufacturers and installs rooftop solar panels, for about $2 billion in 2016. SolarCity had over 12,200 employees as of the end of 2016.
The dismissals come at a critical point for the company, which is scrambling to increase vehicle production five-fold and reach a broader market with its new Model 3 sedan. The electric vehicle maker missed targets for producing the lower-cost sedan, manufacturing only 260 last quarter despite a wait list of more than 450,000 customers. It was later revealed by the WSJ that Tesla’s “dirty secret” for the unexpected production problem is that it was banging out parts of the Model 3 by hand.
According to the Mercury News, this week’s dismissals have not been reported to the state Employment Development Department, a spokeswoman said. The state generally requires companies to report layoffs of more than 50 employees in a 30-day period. Tesla countered that the performance-based departures were not considered layoffs and not subject to state notifications.
In an absurd demonstration of Musk’s bizarre management style, the company said the mass terminations have “generally boosted worker morale”, as high-performing employees have been rewarded. it was unclear what the 700 layoffs, pardon, exit events did to worker morale.
While the company said this week’s dismissals were the result of a company-wide annual review, claiming some workers received promotions and bonuses, and expects to hire for the “vast majority” of new vacancies, insisting the mass terminations were not layoffs, some critics have noted that these are layoffs “plain and simple” as a company does not fire 700 people at the same time in the middle of the year due to “performance” issues.
“As with any company, especially one of over 33,000 employees, performance reviews also occasionally result in employee departures,” a spokesman said. “Tesla is continuing to grow and hire new employees around the world.”
Still, validating the argument that these were indeed layoffs, in interviews former and current employees told the Mercury News little or no warning preceded the dismissals. The workers interviewed include trained engineers working on vehicle design and production, a supervisor and factory employees.
“Workers spoke on the condition of anonymity because they feared reprisals from the company. Employees said the firings have lowered morale through many departments. Several said Model X, Model S and former SolarCity operations seemed to be targeted.”
Among those fired was Juan Maldonado, a production worker, who felt the tap on his shoulder on Thursday. He worked at Tesla for nearly four years, and said he heard about 60 other workers in his section of the factory were dismissed. Maldonado, 48, said he ran late for work twice in recent months, but thought he had straightened things out with his supervisor. Now, he said, “I’m going to try to find a job.”
The dismissals come after Tesla said it built just 260 Model 3 sedans during the third quarter, less than a fifth of its 1,500-unit forecast. The company has offered scant detail about the problems it’s having producing the car, although the previously noted WSJ report suggests that Tesla is having severe manufacturing bottlenecks forcing workers to build parts of the Model 3 by hand. The vehicle’s entry price starts at $35,000, roughly half the cost of Tesla’s least-expensive Model S sedan. When unveiling the Model 3, Musk joked to employees they would be going through “production hell” to meet demand for the new car. Little did many the employees know that hell would come in the form of a pink slip.
As Bloomberg notes, a delayed ramp-up risks the ire of some of the almost half million reservation holders who started paying $1,000 deposits early last year. On Oct. 12, Tesla Chief Executive Officer Elon Musk posted a video on Instagram of what he said was a stamping press producing body panels for the Model 3.
Musk has told investors the company is focused on Model 3 production and expects to eventually build 10,000 cars a week. The manufacturing will become highly automated, but Musk told investors during the early ramp up he expected high overtime costs.
* * *
Meanwhile, Tesla has faced ongoing discontent from some factory workers, who have complained about work conditions and wages below the auto industry average. Tesla has a hearing before the National Labor Relations Board in November for charges that company supervisors and security guards harassed workers distributing union literature. Tesla denied the accusations.
Openly pro-union workers were among those fired this week. Some believe they were targeted, even as the company denied union activities played a role in the dismissals.
Quoted by the Mercury News, Michael Harley, managing editor at Kelley Blue Book and Autotrader, thought the dismissals could be an effort to improve vehicle production. “It’s no secret that Tesla’s Model 3 development and ramp-up for production has been derailed,” Harley said. “A major change in staff – whether dismissal or layoff – is an indication that there is an upper level movement to put the train back on the tracks.”
Whatever the reason behind the “non-layoffs”, one thing is clear: Tesla has a management exodus problem as demonstrated by this extensive list of recent senior level departures from the company, including two of the most important, non CEO positions in just the past three months.