SAN FRANCISCO, June 3 (Reuters) – TESLA (TSLA.O) Elon Musk, CEO, said he has a “very bad feeling” about the economy and needs to cut about 10% of jobs at the electric car maker, he said in an email to executives seen by Reuters.
The letter, which was sent Thursday titled “Pause for All Employment Worldwide,” came two days after the billionaire asked employees to return to the workplace or leave, and adds to a growing set of warnings from business leaders about the risks of a recession.
The SEC’s annual filing showed, that nearly 100,000 people were employed at Tesla and its subsidiaries at the end of 2021.
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The company was not immediately available for comment.
Tesla shares fell nearly 3% in pre-market trading on Friday and its Frankfurt-listed stock fell 3.6% after the Reuters report. US Nasdaq futures turned negative and traded 0.6% lower.
Musk has warned in recent weeks about the risks of a recession, but his email ordering a hiring freeze and staff cut was the direct, most well-known message of its kind from the automaker’s boss.
So far, demand for Tesla cars and other electric vehicles has remained strong and many of the traditional indicators of a decline – including increased dealer inventories and stimulus in the US – have not materialized.
But Tesla has struggled to restart production at its Shanghai plant after the COVID-19 shutdown led to costly outages.
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 the global economy to slow down by the end of the year. The US will calm down, while China and Europe will not recover.”
Musk’s bleak outlook reflects recent comments from executives including Jamie Dimon, CEO of JPMorgan Chase & Co., and Goldman Sachs Chairman John Waldron.
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Inflation in the United States is hovering at its highest levels in 40 years and causing a jump in the cost of living for Americans, while the Federal Reserve faces the difficult task of curbing demand enough to curb inflation while not causing a recession.
Musk, the world’s richest man according to Forbes magazine, did not explain why he “feeled very badly” about the economic outlook in a brief email seen by Reuters.
Nor was it immediately clear what the implication, if any, of Musk’s vision of his $44 billion offer to buy Twitter would be. (TWTR.N).
Several analysts recently lowered Tesla’s price target, predicting a production loss at its Shanghai plant, a hub for China’s supply of electric vehicles and for export.
China made up just over a third of Tesla’s global deliveries in 2021, according to company disclosures and data from sales there. On Thursday, Daiwa Capital Markets estimated Tesla had about 32,000 orders awaiting delivery in China, compared to BYD’s 600,000 vehicles. (002594.SZ)its biggest electric competitor in that market.
Wedbush Securities analyst Daniel Ives said in a tweet that Musk and Tesla appear to be “trying to be ahead of the slower delivery ramp this year and maintain margins before an economic slowdown.”
“stop all hiring”
Before Musk’s warning, Tesla had about 5,000 jobs posted on LinkedIn from sales in Tokyo and engineers at its giant new factory in Berlin to deep learning scientists in Palo Alto. She had scheduled an online recruitment event for Shanghai on June 9 on her WeChat channel.
Musk’s request for employees to return to the office encountered obstacles in Germany. A union leader said his plan to cut jobs would meet resistance in the Netherlands, where Tesla is based in Europe.
“You can’t just fire Dutch workers,” said FNV spokesman Hans Walthe, adding that Tesla would have to negotiate with the Labor Council the terms of any departure.
In an email on Tuesday, Musk said Tesla employees are required to stay in the office for at least 40 hours a week, to lock the door on any remote work. “If you don’t show up, we’ll assume you quit,” he said.
Musk has repeatedly pointed to the risk of a recession in recent comments.
“I think we’re probably in a recession and the recession is only going to get worse,” he said, addressing a teleconference in mid-May in Miami Beach.
In late May, when Musk was asked on Twitter if a recession was about to happen, he said, “Yeah, but that’s actually a good thing. It’s been raining money on fools for too long. Some bankruptcies should happen.”
Other companies have cut jobs or slowed or paused hiring amid weak demand.
Last month, Netflix (NFLX.O) It said it had laid off about 150 people, mostly in the United States, and Peloton said in February it would cut 2,800 jobs. ID pads (FB.O)Uber (UBER.N) And other tech companies have slowed hiring. Read more
In June 2018, Musk said Tesla would cut 9% of its workforce as the loss-making company at the time struggled to ramp up production of Model 3 electric sedans, even though data in its SEC filings showed the cuts had been made. More compensated through hiring by the end of the year.
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(Hyunjoo Jin Reporting) Additional reporting by John O’Donnell, Jo Min Park and Zoe Zhang; Editing by John Stonestreet and Mark Potter
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