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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.
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.
Tesla dramatically, then laid off ~9% in Q2 (and in Q3 posted a hugely-expectations-beating ER). After Q2, the company steadily expanded by an additional 30%, then now is laying off 7% in Q1. Is this what you call a collapsing company?
A company's needs change over time. The faster the company grows, the more rapidly its needs change. Open new lines and facilities? You need to hire people. Make those lines more efficient and automated? Well... I guess the "nice" option would be to keep people around that you don't need. But that's not the economically efficient way.
SpaceX is a great case. SpaceX has been growing very rapidly. They got good at really churning out Falcon 9s - a couple a month. Now, though... what's the point? They're reusing their rockets; they don't need nearly as many of them. Now they're mainly just manufacturing the (much smaller) upper stages, with only the occasional lower stage. What's your plan... should they just keep producing at the same rate for the heck of it? Even though they plan to retire Falcon 9 once BFR is fully operational?
Layoffs suck. There's no question about that. I was once laid off; I know what it's like personally. But layoffs are also the most efficient way to run a business, which is why they're a normal business practice.
Hey, guys, I'm just pleased as punch to report that it's a fleet of a hundred Vogon Battle Destroyers!
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.
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.
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.
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!
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!
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
GE circa 20 years ago - while being one of the biggest companies in the world, famously laid of ten percent every year as a matter of routine.
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.
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.
On an annual basis, he is absolutely correct. Tesla had TWO profitable quarters. That’s two periods of 90 days in which Tesla managed to just barely float above nil.