Tesla’s CEO Elon Musk has a “super bad feeling” about the economy and needs to lay off about 10% of the jobs at the electric car manufacturer, he said in an email to executives seen by Reuters.
The message was sent yesterday and was entitled “pause all employment worldwide”.
It came two days later the billionaire told staff to return to work or leaveand adds a growing chorus of business leaders’ warnings about the dangers of recession.
Tesla employed nearly 100,000 people in the company and its subsidiaries by the end of 2021, according to its annual SEC file.
Tesla shares fell nearly 3% in the US before stock trading today and its Frankfurt-listed share was down 3.6% according to the Reuters report.
Musk has warned in recent weeks about the risk of a recession, but his email in which he ordered a layoff and staff cuts was the most direct and high-profile announcement of its kind from the head of a carmaker.
To date, demand for Tesla cars and other electric vehicles has remained strong and many of the traditional indicators of a downturn – including increasing dealer stocks and incentives in the US – have not materialized.
But Tesla has struggled to restart production at its Shanghai plant after the Covid-19 locks forced costly outages at the plant.
“Musk’s bad feeling is shared by many people,” said Carsten Brzeski, global head of macroeconomic research at Dutch bank ING.
“But we are not talking about a global recession. We expect a cooling of the global economy towards the end of the year. The United States will cool down, while China and Europe will not recover,” he said.
Musk’s bleak views reflect recent comments from executives including JPMorgan Chase & Co’s CEO Jamie Dimon and Goldman Sachs president John Waldron.
A “hurricane is right out there on the road that comes our way,” Dimon said this week.
Inflation in the US is hovering at 40-year highs and has caused a jump in the cost of living for Americans, while the Federal Reserve is facing the difficult task of dampening demand enough to dampen inflation while not causing a recession.
Musk, the world’s richest man according to Forbes, did not develop the reasons for his “super bad feeling” about the economic prospects in the short email that Reuters saw.
A number of analysts have recently lowered price targets for Tesla and predicted slower deliveries due to Chinese shutdowns and lost production at its Shanghai plant, a hub that supplies electric vehicles to China and for export.
China accounted for just over a third of Tesla’s global deliveries in 2021, according to the company’s revelations and data released on sales there.
Wedbush Securities analyst Daniel Ives said in a tweet that it seemed like Musk and Tesla “were trying to stay ahead of a slower delivery ramp this year and preserve margins in the face of an economic downturn.”
Before Musk’s warning, Tesla had about 5,000 job ads on LinkedIn from sales roles in Tokyo and engineers at its new gig factory in Berlin to researchers with deep learning in Palo Alto. It had planned an online employment event for Shanghai on June 9 on its WeChat channel.
Musk’s demand that staff return to the office has already been put under pressure in Germany.
“Everyone at Tesla must spend at least 40 hours in the office a week,” Musk wrote in his Tuesday email. “If you do not show up, we assume you have resigned.”
Musk has repeatedly referred to the risk of a recession in recent comments.
Speaking at a conference in mid-May in Miami Beach, Musk said: “I think we’ll probably be in a recession and the recession will get worse.”
“It’s probably going to be a little tough, I do not know, a year, maybe 12 to 18 months, is usually the time it takes for a correction to happen,” he added.
In late May, when asked by a Twitter user if the economy was approaching a recession, Musk said: “Yes, but this is actually a good thing. It’s been raining money on fools for too long. Some bankruptcies have to happen.”
Musk also engaged this week in a Twitter chat with Australian technology billionaire and Atlassian co-founder Scott Farquhar, who ridiculed the back-to-office directive as “like something from the 1950s”.
Musk tweeted: “Recessions serve an important economic cleansing function,” in response to a tweet from Farquhar that encouraged Tesla employees to explore their remote workplaces.
Jason Stomel, founder of the technical talent agency Cadre, said of the Return to Work Directive: “I think there is potential that this is just a disguised dismissal, which means they can get rid of people with exhaustion, or without actually having to. a dismissal. “
“Musk knows that there is a percentage of workers who simply will not return,” which he said would be cheaper because no severance pay would be needed.
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