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Tesla Is Cutting 7 Percent of Its Workforce To Reduce Model 3 Price (cnbc.com)
Tesla CEO Elon Musk announced today that the company would cut 7% of its workforce in order to cut costs as the company prepares to ramp up production and boost margins as they get closer to releasing the long-awaited $35,000 version of the Model 3. CNBC reports: Musk says Tesla faces "an extremely difficult challenge" in making their products a competitive alternative to traditional vehicles, adding that he expects Q4 profit to come in significantly lower than Q3. Five experts weigh in on whether it's a challenge Musk and Tesla can overcome:
- Oppenheimer managing director Colin Rusch agrees with Jed Dorsheimer on Tesla's job cuts, but isn't bullish on what they'll accomplish.
- Canaccord Genuity's Jed Dorsheimer thinks the workforce cut is just fine, calling it "clean-up" after the company's latest push to ramp up Model 3 production came with a wealth of new hires.
- "They're certainly in a better position than they were eight or nine months ago," says ROTH Capital's Craig Irwin. "Where we're going to see pressure on the stock today is the 'copy-paste' expectations of Q3 going through 2019 need to be reset."
- Needham's Raji Gil thinks that Tesla may have overestimated how many people can actually afford a high-end electric vehicle. "Clearly, in my mind, they have an issue with demand," says Rusch, " If you do the math, you have to conclude that 90 percent of the reservations that have been built up over the past couple of years are folks that wanted the standard battery version of the vehicle, which is $35,000."
- Westly Group founder Steve Westly loves where Elon Musk's company is right now, calling Tesla "the iPhone of electric vehicles," and saying they're well ahead of the game when it comes to a quickly-changing auto market.
- Oppenheimer managing director Colin Rusch agrees with Jed Dorsheimer on Tesla's job cuts, but isn't bullish on what they'll accomplish.
- Canaccord Genuity's Jed Dorsheimer thinks the workforce cut is just fine, calling it "clean-up" after the company's latest push to ramp up Model 3 production came with a wealth of new hires.
- "They're certainly in a better position than they were eight or nine months ago," says ROTH Capital's Craig Irwin. "Where we're going to see pressure on the stock today is the 'copy-paste' expectations of Q3 going through 2019 need to be reset."
- Needham's Raji Gil thinks that Tesla may have overestimated how many people can actually afford a high-end electric vehicle. "Clearly, in my mind, they have an issue with demand," says Rusch, " If you do the math, you have to conclude that 90 percent of the reservations that have been built up over the past couple of years are folks that wanted the standard battery version of the vehicle, which is $35,000."
- Westly Group founder Steve Westly loves where Elon Musk's company is right now, calling Tesla "the iPhone of electric vehicles," and saying they're well ahead of the game when it comes to a quickly-changing auto market.
10% at SpaceX... Elon Musk ventures are not smelling as good as they once did :-/ Maybe he's not the savior as once portrayed.
So your view is that a company refining its production line so that it doesn't need as many workers should have - back when more work hours were needed per vehicle -.... just never have hired people? So, what... just wait until a production line is at its maximum efficiency before you actually produce anything, regardless of whether its gross margins were well positive long before that point?
I sure hope you're not in charge of managing capital for a company.
Hey, guys, I'm just pleased as punch to report that it's a fleet of a hundred Vogon Battle Destroyers!
This has nothing to do with mis-management. I believe every large company with a large workforce needs to go through and cut 5% or so every now and then. It gives them an easy chance to cut the bottom performers as well as evaluate positions that might be unneeded now. Even companies that are hiring still fire people because the needs of the company change over time with a company like this.
and boost production?
If they've gotten the kinks with their automation processes worked out yeah, that'll work. It's 7%, so it wouldn't surprise me either. That's a small enough (and specific enough) number that I could believe they fixed one of their broken automation processes.
We should probably start figuring out what we're gonna do with all the folks laid off. Assuming this works out then if Tesla can do it the other car companies can. Oh well, guess all those laid off blue collar guys can go be HVAC & Welders...
Hi! I make Firefox Plug-ins. Check 'em out @ https://addons.mozilla.org/en-US/firefox/addon/youtube-mp3-podcaster/
I don't think more care in hiring works - especially when you need people quick. People can tell you anything and references are rarely responsive or reliable. You have to take your best shot and be willing to clean out the fluff. A 7% layoff after a rapid 30% buildup seems like about the level of true fluff I would expect. Many of the 30% just added aren't even beyond the trial period yet. Now is the time to get rid of those that didn't live up to their spiel.
In a typical hiring round, I expect about 1 in 10 hires to be what I really wanted, 6 or 7 in 10 to be acceptable folks that will never be stars, and 2 or 3 in 10 to be anti-productive mistakes. In most companies, I'd have trouble getting rid of even half the mistakes. Tesla doesn't seem to have that trouble.
Union folks may argue that this is why you need unions, but I've never found that union "training" filters for work ethics. Just knowing how to do a job doesn't mean you'll always bring your A-game to it. Unions tend to overprotect people who'd rather play games than bring their game.
Tesla had a massive layoff 9% in 2018 and another 7% today. What you say doesn't make any sense. A healthy company doesn't have massive layoffs. You are just a Musk fanboy. It might be a good idea to lay off people in order to save a dying company, but it wasn't because of "work hours needed per vehicle". It is the oldest trick that companies pull: layoffs to push the short term margins up to keep the stock price high and the company solvent. Musk thought he could use automation instead of people, because he was the smartest guy in the room, that is why he bought Tesla, but it didn't work out, so now he is stuck with expensive people. The other warning sign is all the executives leaving with their stock options on the table.
No, that's not exactly the view. But 6 months ago when there was a 9% layoff the communication at the time was "I also want to emphasize that we are making this hard decision now so that we never have to do this again.”
Are you saying that Tesla's management sees "never" as being only 5 months? Or is this just outright lying to employees to cover mismanagement?
Slashdot still doesnâ(TM)t support Unicode after it was added to the HTML standard in 1997.
According to wikipedia, they have about 45k employees (2018). So about 3k. Maybe about a 100 million annual savings (give or take many millions)? Musk and Tesla together are set to pay $40 million in fines because of the "I have a buyer" tweet - just a single tweet. Maybe the other 60 million remaining (from firing 7%) is to pay for future tweets.
Add to this, I read that China offered Musk permenent residency (citizenship?) recently.
Electric is the future for a clean environment. We absolutely need a new tax credit to keep manufacturers producing and selling more electric cars. China is years ahead of the U.S. is solar already and will end their dependence on fossil fuels much sooner than the U.S. If the U.S. doesn't catch up now it will be left with a failing economy and dying earth.
Their problems right now are in production. You lower the price to get more people to buy your product. But demand already exceeds supply.
This doesn't made sense unless they are trying to do a quasi ponzi scheme through getting more money from more people paying the prepaid down-payment.
At this point I am beginning to doubt Tesla. They have a great product. But for all their troubles their assembly line should be finished as they have had more than enough time. How do other car manufacturers do it and how did the Japanese start their companies after us Americans if it's this hard? I'm not buying it.
I think the truth is the required performance batteries are hard to manufacture at the advertised price point. They are trying to leverage presale numbers to satisfy their investors and expecting a magical manufacturing breakthrough. I think they need a new CEO to put on the breaks and realistically raise prices and or do a limited bankruptcy.
One solution I suggest is selling the auto bodies of their cars without the batteries. Ditch the auto driving feature into another company and let people hack their own cars and hence assume full liability. They are attractive car bodies. Is there no way to retrofit them for a fuel cell engine? Bring the fun back.
Thought so, it's not rocket science.
The layoff was across the entire company. There's people in the Energy business that are packing their shit out to the parking lot.
This layoff was NOT about car manufacturing.
Slashdot still doesnâ(TM)t support Unicode after it was added to the HTML standard in 1997.
So you lay off 7% last year, then grow 30% (according to Mr. Musk's email), then lay off 7% again?
This isn't a RIF, it's a mass firing in disguise. This is typical behavior for large companies. They do a "reduction in force" and let go of all of their dead weight. It's easier on them because there're fewer legal complications. Firing someone is hard. To avoid legal issues you need to meticulously document an employee's problems and work with them to correct it through multiple stages.
And it's definitely better PR for the company.
Perhaps a little more care should be paid to not hiring more people than your business can support.
Peoples' attitude toward their employment change. They become disinterested and not effective. And it's impossible to hire with perfect accuracy. Sometimes you just end up with people that aren't right for the position.
Wow, you have internal Tesla documents showing the ratio of layoffs in each department? By all means, share them!
Hey, guys, I'm just pleased as punch to report that it's a fleet of a hundred Vogon Battle Destroyers!
Or Occam's alternative: Tesla is floundering and are now trying the "cut your way to success" method.
So.... Funding not secured?
For most people electricity costs are tiered. I know this is adjusted for peak hours during the day, but if majority of people in a region go to EV cars, then peak demand will shift to the PM hours when people get home to work. Seems like the economics are shifting and maybe not even as good as what seems true today.
Even so, I think EV vehicles are worth pursuing, but I do think they are luxury items and will remain so for another 5 maybe 10 years.
sigs are for losers (except to point out that sigs are for losers)
That is one advantage of humans over robots. Robots cost too much initial cost, once installed the running cost is low. Humans can be hired quickly and made to adapt to changing and varying demands quickly. They are adaptable, but once the job is done, they can be sent home.
Tesla is still under serious pressure for cash and it is not able to tap into the capital markets. It needs to prove it can do day to day operations and be GAAP earning positive for a few quarters. Only then the capital pressure will ease and it can tap in again.
This email says 18Q4 is also positive, but not as much as 18Q3. That is not a serious problem. It needs to make 400 million in 18Q4 + 19Q1. Once 18Q1 rolls off the trailing four quarter, it has a shot at being positive earnings in the trailing four quarters. That will make it into SP500. Serious index fund investing. Will remove the shorts completely and it will be able to borrow again. Till then it has to operate on such drastic measures.
Things must be pretty ok inside, it looks like. There is not twitter eruptions from Elon.
sed -e 's/Chuck Norris/Rajnikant/g' joke > fact
If the battery costs about $8K, and the electric motors should be cheaper than an ICE, I would expect a surcharge of about $4K, not $10K.
The trouble for Telsa is when battery prices halve again, all the big manufacturers will be making electric cars, and they have experience at keeping costs very low.
LOL. Sure, I totally believe you have internal Tesla documents. Totally. This is my believing-you face. See it? Totally believing you.
Hey, guys, I'm just pleased as punch to report that it's a fleet of a hundred Vogon Battle Destroyers!
As a side note: Q4 ER date announced for 30 January. Over two weeks before the median Q4 ER ;)
Bullish AF. Also, I might roll my options forward a week and get a bit more leverage going into the report. Too awesome :)
Hey, guys, I'm just pleased as punch to report that it's a fleet of a hundred Vogon Battle Destroyers!
Profits down, shipments below their 5K/week goal they "hit" in Q3, sales stagnating - it's what you do when you are running out of cash and have more capacity than sales. You cut workers.
Browsing at +1 - no ACs, I ignore their posts. So refreshing!
As a white South African, Musk should do well in China.
You realize that tour links undercut what you write about them, don't you?
Hey, guys, I'm just pleased as punch to report that it's a fleet of a hundred Vogon Battle Destroyers!
I've long strongly supported Tesla, but it took the combined vitriol and stupidity of last summer's short seller assault to get me to finally put my money where my mouth is.
None of this is exactly a secret here on Slashdot.
Hey, guys, I'm just pleased as punch to report that it's a fleet of a hundred Vogon Battle Destroyers!
Way to not answer the question, and not back up your previous assertions.
You claimed this layoff was because increased manufacturing efficiency meant they had a bunch of extra people bumping around the factory they didn't need.
Then why are they laying off software developers and QA people in a completely different division that doesn't have anything to do with cars?
Back up your assertions. Or admit you're full of shit and buying the press release hook, line, and sinker.
Slashdot still doesnâ(TM)t support Unicode after it was added to the HTML standard in 1997.
Next to Solyndra employment at Tesla is booming.
You've missed a massive cost sink for ICE cars: Maintenance.
I've now got a few friends with EVs, and they don't really do maintenance. Rotate the tires every now and then, add some washer fluid, and that's about it.
EVs don't have engines, radiators, exhaust systems, or transmissions, and the regenerative braking is extending brake life to 100k+ miles. They are seriously simplified vehicles, and those cost savings just go up with time, when ICE parts would be starting to near their end of life.
I've got a 14 year old car which has always been relatively cheap, but I know that in the next few years I need to drop many thousands of dollars into preventative maintenance that I wouldn't have to put into an EV. I need to fix the heat shield, drop a couple grand into the exhaust, new plugs and wires, a radiator flush, new brakes, etc. etc. And that's what I know. I don't know exactly how good the engine, coolant, and transmission systems are.
I'd happily take none of those but a scheduled battery change every 8-10 years.
Velociraptor = Distiraptor / Timeraptor
They had extra staff for future expansion but the Chinese production facility means that growth will be in China instead and a far greater number of cars, a whole lot more cars, order of magnitude more. You wont hear all that much out of China until they get closer to production and of course you will hear high volume advertising once they achieve full production.
Tesla needed China with General Motors and Mercedes both declaring major electric vehicle production lines and more will follow. For Tesla to compete it's base model production had to shift to China.
Chaos - everything, everywhere, everywhen
This has nothing to do with mis-management. I believe every large company with a large workforce needs to go through and cut 5% or so every now and then. It gives them an easy chance to cut the bottom performers as well as evaluate positions that might be unneeded now. Even companies that are hiring still fire people because the needs of the company change over time with a company like this.
Obviously you have never worked in any large companies for any length of time.
Those on the top management have no idea where the bottom performers are, those middle-managers will keep only their lackeys while cutting away anyone who could potentially threaten their position (especially high performers who they cannot dominate), and those first level managers near the bottom only wanted to keep enough hands on the team to do the job so they wanted to keep everyone. So no matter where the decision was made, it has no relation to the individual's performance.
There NO WAY in hell that any large company can cut away 7% of its staff without at least half of them top/good performers.
Oliver.
But... but... I thought you were saying that Musk was a fraud and that Tesla was a non-profitable failure. Therefore investing in Tesla will result in losing money.
So, then, how is this "about money"?
I'm a leaf on the wind. Watch how I soar.
LOL. Sure, I totally believe you have internal Tesla documents. Totally. This is my believing-you face. See it? Totally believing you.
Time and again you, Rei, have made posts here that show that you have a close knowledge of Tesla affairs - or you are very good at fabricating an appearance that you have. I do believe you have that knowledge, even if I don't buy your conclusions and predictions which are generally hype. I have even half-jokingly suggested that you are Musk himself.
Yet you poke fun at the idea that anyone else has internal knowledge of Tesla. I am prepared to believe that the GP does have the data that he bases his comment on - it sounds very plausible and if you say anything to the contrary it is just your word against his.
Electric motors, steering components, suspension components, brakes, air conditioning- all these systems are found in Teslas and will wear out. The question is when. I agree that there are fewer systems to maintain, but battery replacements won't be your only problem!
Alcohol, Tobacco and Firearms should be the name of a store, not a government agency.
The fines were too small to make any difference in car prices. But that dust-up had a bigger impact on Tesla than you might realize.
The SEC was letting Musk get away with obviously BS statements about future production and profitability until he made the comments about going private; that crossed the line from startup bluster to stock price manipulation. They made it clear that from then on, all forward-looking statements he makes about Tesla need to be properly vetted. Since then his predictions have become much more realistic.
Furthermore, you hire workers to build. Once you automate what they built, you lay off. Then you build something new, so you hire new people. Then you automate that, and lay off again. Tesla isn't a stable company. It is growing, really really fast. That's why there are going to be these spurts and corrections to their payroll.
I know at least for Southern California Edison here in Ventura, we have tiered pricing based upon consumption - not time of day. I'm in zone 6, so my allocation for my baseline is 9.6 kWh per day.
Assuming I had a P85, and I drive 30 miles per day, I'd use up pretty much my entire allocation just for my car (85 kWh battery, ~300 mile range, so about 8.5 kWh for a 30 mile trip). My baseline is at $0.18 per kWh; my car would use all that. Then my home would pay $0.23/kWh for power. If I drove some long miles, and pushed my monthly use up pretty high, it's at $0.40/kWh.
California's tiered systems - at least for SCE - are pretty poor for electric users, especially those with electric cars.
Browsing at +1 - no ACs, I ignore their posts. So refreshing!
Maintenance for newer ICE cars is pretty minimal; my wife's 2015 Mustang needs an oil change every 8K miles. Discounting tires (which all cars will consume at about the same rate, assuming the same use/abuse), brake system flush (which needs to be done ever 3-4 years - regardless of type of car which means EVs as well), and assuming we'll need to do brakes in about another 14K miles (based upon current wear, that's at 50K miles), we're spending about $7 per month in maintenance. Oil change is $20, radiator flush was $50, and a 4 wheel brake job will be around $240.
Plugs and wires are essentially lifetime (100K miles), exhaust is good for at least 100K miles/10 years (about $500 to replace), transmission filter/fluid change is 100K miles (about $100), etc. Modern cars have really low maintenance requirements, thanks to tremendous improvements in material science. I'll probably end up spending around $1400 more for my ICE over 100K miles, in maintenance; at our rate of about 10K miles per year, that's about $12 per month. For brakes, exhaust, transmission, etc. Really not that much of an expense at all.
Note this is for a 2015 Mustang Ecoboost convertible, loaded, we bought for $37,000 new. We get a solid 25.3 MPG mixed (city/highway), so we'll buy about $16,000 worth of gas over those 10 years (California - gas ain't cheap). My all-in costs will be very competitive with a Model 3 over 10 years, but I'll have put out a lot less money up-front for the ICE, and I'll have no worries taking it on the occasional trip to Las Vegas or Phoenix without having to stop for a few hours to charge half-way there.
Browsing at +1 - no ACs, I ignore their posts. So refreshing!
The Toyota Camry and Honda Accord are competitors as well - and they start at $23K. Curious why you left those off, given they are a bit larger internally than the Model 3, about the same size outside, and are some of the top-selling vehicles. It is that $20K premium you pay for the Model 3 that stopped you?
Browsing at +1 - no ACs, I ignore their posts. So refreshing!
EVs don't have engines, radiators, exhaust systems, or transmissions,
They do have radiators, because they have cooling systems. Unless they're a Leaf, which sucks. But the new Leaf will have a cooling system, so it will suck less. It also lets you use waste heat to heat the cabin, which makes it cheaper to operate during periods where the weather is cold, and the battery is producing heat. Also, there are benefits to cooling not just the battery, but also the motor and even the motor driver, so they can potentially have a more complex cooling system than a basic ICE auto. The Model 3 has a coolant bottle under the hood with a liquid to liquid heat exchanger built into it!
With that said, there's a shitload of parts in the engine and in most transmissions, and getting rid of those is a massive win.
"You're right," Fisheye says. "I should have set it on 'whip' or 'chop.'"
An EV still has a transmission retard.
No, an Allison B300R has a transmission retard...er. Really awesome for doing hills in a bus. Takes about a gallon of fluid. We have one in front of a Cummins ISC (it's in a rear-engined chassis.) An EV has a gear reduction box, unless it's an unupdated Tesla Roadster. That's different from a transmission.
"You're right," Fisheye says. "I should have set it on 'whip' or 'chop.'"
1. They just cut 9% less than a year ago.
2. Arbitrary cutting of jobs by telling each manager that they have to lose X headcount isn't "thinning the dead wood". It's possible for a team to be highly performing and not carrying the water of half-asses.
3. The people cut aren't necessarily chosen for performance-based reasons. Example: Tesla really doesn't like remote workers, so remote workers are high on the to-cut list regardless of how indispensable those people may be to ongoing operations. Feel free to ask me how I know this - I worked for Tesla until last month, as a remote worker, and was scheduled to be cut in June. My management chain went to bat for me, knowing that I had a high degree of knowledge about the systems I work on, and instead they chose another remote developer.
I left in December of my own accord, and I'm really glad that I did now.
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