Musk Backslides on Profit Every Quarter Pledge, Will Cut 7% of Workforce


In a long and apparently very well documented statement sent via email to Tesla employees, Elon Musk advocates the need to lay-off a rather great number of people, around 3,000 of the 45,000 thousand it now employs.

Tesla said on Friday it would cut thousands of jobs to rein in costs as it plans to increase production of lower-priced, less-profitable versions of its crucial Model 3 sedan, sending its shares down 7 percent. "There isn't any other way".

Musk acknowledged the challenges that Tesla is currently facing, particularly as the company is now setting the stage for the impending release of the Model 3's most aggressively-priced variant.

Tesla will also keep only the "most critical temps and contractors", according to Elon Musk. Musk also said Tesla could be in the black for the first quarter of 2019 "with great difficulty, effort and some luck".

Musk speaks rather bluntly about the hard road ahead for Tesla in his email, but should everything go according to plan, we should see the mid-range Model 3 launch in all markets around May. Though results for Q4 aren't quite settled yet, he says that "preliminary, unaudited results indicate that we again made a GAAP profit, be less than Q3". A 7 percent cut would involve laying off about 3,150 people.

Mr Musk said Tesla plans to ramp up production of the Model 3, "as we need to reach more customers who can afford our vehicles".

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Electric-vehicle maker Tesla will recall over 14,000 Model S cars in China as part of the global automotive sector's effort to replace potentially unsafe airbags made by Takata, China's market regulator announced on Friday. It also seemed to confirm fears of an excessively expensive production process that reached pace too late to take advantage of the vast market share Tesla now enjoys among EVs in the U.S.

In October, Musk tweeted that the company's workforce was 45,000 people.

The recall, which involves cars made between February 2014 and December 2016, will begin on April 10, the State Administration for Market Regulation said in a statement on its website on Friday.

Tesla increased staff by 30 percent a year ago, which is "more than we can support", Musk said early Friday.

Tesla, it seems, is not out of the woods yet, despite selling nearly 100,000 electric cars a year ago.

Given rising costs and competitive pressures, cutting staff is a "practical, traditional" step for Tesla to take, says Jessica Caldwell, the executive director of industry analysis at Edmunds.