Last month, Tesla CEO Elon Musk announced a vague plan to flatten management and restructure the company in order to achieve profitability during the second half of the year.

Following the announcement, Electrek has now learned of a round of layoffs currently ongoing at Tesla, which could see as much as 9% of the workforce leave the company.

In an email sent to employees last month and obtained by Electrek, Musk announced “a thorough reorganization” of the company:

To ensure that Tesla is well prepared for the future, we have been undertaking a thorough reorganization of our company. As part of the reorg, we are flattening the management structure to improve communication, combining functions where sensible and trimming activities that are not vital to the success of our mission.

It wasn’t clear what would be the result of “flattening the management structure”, but layoffs were expected to be part of the plan.

According to sources familiar with the matter, there was a round of layoffs at Tesla that started on Monday and it is going to be made official by Tesla CEO Elon Musk today (update: Musk sent an email to employees confirming the news. See below for more details).

As much as 9% of Tesla’s workforce will be let go.

Tesla confirmed that only salaried employees will be laid off and no production associates will be let go as Tesla is still focused on increasing Model 3 production.

Employees affected by the round of layoffs are going to be informed this week. We are told that some of them already were let go Monday and Tuesday.

The move follows Tesla starting a brutal review of contractors and firing everyone that is not vouched for by an employee last month.

Tesla’s workforce has grown at an incredible pace since the acquisition of SolarCity, which pushed Tesla’s total headcount to over 30,000 employees.

It means that Tesla could let go over 3,000 employees in this round of layoffs.

After the acquisition of SolarCity, Tesla had another round of layoffs to restructure and remove duplicate positions from the acquisition, which resulted in about 20% of SolarCity’s workforce being let go.

For the latest round of layoffs, Musk explained how they decided who to let go in an email to employees:

“We made these decisions by evaluating the criticality of each position, whether certain jobs could be done more efficiently and productively, and by assessing the specific skills and abilities of each individual in the company. As you know, we are also continuing to flatten our management structure to help us communicate better, eliminate bureaucracy and move faster.”

The CEO also confirmed that Tesla didn’t renew its contract with Home Depot to sell its energy products at their stores.

Tesla energy advisors were supposed to be at 800 Home Depots across the US earlier this year.

Though Musk also said that “the majority of Tesla employees working at Home Depot will be offered the opportunity to move over to Tesla retail locations” as the company is focusing on using its own stores to sell its solar products and Powerwalls.

Therefore, they shouldn’t represent a significant part of this round of layoffs.

Musk also confirmed that employees being let go this week will receive “significant salary and stock vesting (proportionate to length of service).”

The CEO ended the email with this note to the workers who are leaving and also to those who are staying:

“To those who are departing, thank you for everything you’ve done for Tesla and we wish you well in your future opportunities. To those remaining, I would like to thank you in advance for the difficult job that remains ahead. We are a small company in one of the toughest and most competitive industries on Earth, where just staying alive, let alone growing, is a form of victory (Tesla and Ford remain the only American car companies who haven’t gone bankrupt). Yet, despite our tiny size, Tesla has already played a major role in moving the auto industry towards sustainable electric transport and moving the energy industry towards sustainable power generation and storage. We must continue to drive that forward for the good of the world.”

Musk also added Tesla “will still continue to hire outstanding talent in critical roles.”

Here’s the email in full:

From: Elon Musk Sent: Tuesday, June 12, 2018 10:27 AM To: Everybody Subject: Reorg Update As described previously, we are conducting a comprehensive organizational restructuring across our whole company. Tesla has grown and evolved rapidly over the past several years, which has resulted in some duplication of roles and some job functions that, while they made sense in the past, are difficult to justify today. 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% of our colleagues across the company. 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. Given that Tesla has never made an annual profit in the almost 15 years since we have existed, profit is obviously not what motivates us. What drives us is our mission to accelerate the world’s transition to sustainable, clean energy, but we will never achieve that mission unless we eventually demonstrate that we can be sustainably profitable. That is a valid and fair criticism of Tesla’s history to date. This week, we are informing those whose roles are impacted by this action. We made these decisions by evaluating the criticality of each position, whether certain jobs could be done more efficiently and productively, and by assessing the specific skills and abilities of each individual in the company. As you know, we are also continuing to flatten our management structure to help us communicate better, eliminate bureaucracy and move faster. In addition to this company-wide restructuring, we have decided not to renew our residential sales agreement with Home Depot in order to focus our efforts on selling solar power in Tesla stores and online. The majority of Tesla employees working at Home Depot will be offered the opportunity to move over to Tesla retail locations. I would like to thank everyone who is departing Tesla for their hard work over the years. I’m deeply grateful for your many contributions to our mission. It is very difficult to say goodbye. In order to minimize the impact, Tesla is providing significant salary and stock vesting (proportionate to length of service) to those we are letting go. To be clear, Tesla will still continue to hire outstanding talent in critical roles as we move forward and there is still a significant need for additional production personnel. I also want to emphasize that we are making this hard decision now so that we never have to do this again. To those who are departing, thank you for everything you have done for Tesla and we wish you well in your future opportunities. To those remaining, I would like to thank you in advance for the difficult job that remains ahead. We are a small company in one of the toughest and most competitive industries on Earth, where just staying alive, let alone growing, is a form of victory (Tesla and Ford remain the only American car companies who haven’t gone bankrupt). Yet, despite our tiny size, Tesla has already played a major role in moving the auto industry towards sustainable electric transport and moving the energy industry towards sustainable power generation and storage. We must continue to drive that forward for the good of the world. Thanks, Elon

Electrek’s Take

It’s sad for the employees who are let go this week, but it was to be expected since Tesla’s recent growth and the announcement of the restructuring.

A source familiar with the matter said that Tesla grew its workforce by over 10% this year alone so it is technically only setting them back in terms of the size of the workforce by a few months.

At the end of 2015, Tesla had just over 14,000 employees.

As of March 2018, Tesla reported over 37,000 employees.

When you more than double a headcount and add over 20,000 employees in just a few years, there will for inevitably be inefficiencies with your growing personnel structure.

It’s a tough move, but it’s a necessary one if Tesla aims to be cash flow positive during the second half of the year, which is going to be necessary to have those jobs in the long-term anyway.

Therefore, the naysayers and shorters will certainly frame this as “doom and gloom”, but it should ultimately be good for the company.

What do you think? Let us know in the comment section below.

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