Tesla (TSLA.O) CEO Elon
Musk has a "super bad feeling" about the economy and needs to cut
about 10% of jobs at the electric carmaker, he said in an email to executives seen
by Reuters.
The message, sent on Thursday and titled "pause all hiring
worldwide", came two days after the billionaire told staff to return to
the workplace or leave, and adds to a growing chorus of warnings from business
leaders about the risks of recession.
Almost 100,000 people were employed at Tesla and its subsidiaries at the end of
2021, its annual SEC filing showed.
The company was not immediately available for comment.
Tesla shares fell nearly 3% in U.S. pre-market trade on Friday and its Frankfurt-listed
stock was down 3.6% after the Reuters report. U.S. Nasdaq futures turned
negative and were trading 0.6% lower.
Musk has warned in recent weeks about the risks of recession, but his email
ordering a hiring freeze and staff cuts was the most direct and high-profile
message of its kind from the head of an automaker.
So far, demand for Tesla cars and other electric vehicles (EV) has remained
strong and many traditional indicators of a downturn - including increasing
dealer inventories and incentives in the United States - have not materialized.
But Tesla has struggled to restart production at its Shanghai factory after
COVID-19 lockdowns forced 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 global recession. We expect a cooling of the global economy
towards the end of the year. The U.S. will cool off, while China and Europe are
not going to rebound."
Musk's gloomy outlook echoes recent comments from executives including JPMorgan
Chase & Co CEO Jamie Dimon and Goldman Sachs President John Waldron.
A "hurricane is right out there down the road coming our way," Dimon
said this week.
Inflation in the United States is hovering at 40-year highs and has caused a
jump in the cost of living for Americans, while the Federal Reserve faces the
difficult task of dampening demand enough to curb inflation while not causing a
recession.
Musk, the world's richest man according to Forbes, did not elaborate on the
reasons for his "super bad feeling" about the economic outlook in the
brief email seen by Reuters.
It was also not immediately clear what implication, if any, Musk's view would
have for his $44-billion bid for Twitter (TWTR.N).
Several analysts have cut price targets for Tesla recently, forecasting lost
output at its Shanghai plant, a hub supplying EVs to China and for export.
China accounted for just over a third of Tesla's global deliveries in 2021,
according to company disclosures and data released on sales there. On Thursday,
Daiwa Capital Markets estimated Tesla had about 32,000 orders awaiting delivery
in China, compared to 600,000 vehicles for BYD (002594.SZ), its larger EV rival
in that market.
Wedbush Securities analyst Daniel Ives said in a tweet it appeared Musk and
Tesla were "trying to be ahead of a slower delivery ramp this year and
preserve margins ahead of an economic slowdown."
'PAUSE ALL HIRING'
Before Musk's warning, Tesla had about 5,000 job postings on LinkedIn from
sales in Tokyo and engineers at its new Berlin gigafactory to deep learning
scientists in Palo Alto. It had scheduled an online hiring event for Shanghai
on June 9 on its WeChat channel.
Musk's demand that staff return to the office has already faced pushback in
Germany. And his plan to cut jobs would face resistance in the Netherlands,
where Tesla has its European headquarters, a union leader said.
"You can't just fire Dutch workers," said FNV union spokesperson Hans
Walthie, adding Tesla would have to negotiate with a work council on terms for
any departures.
In a Tuesday email, Musk had said Tesla employees were required to be in the
office for a minimum of 40 hours per week, closing the door on any remote work.
"If you don't show up, we will assume you have resigned," he said.
Musk has referred to the risk of a recession repeatedly in recent comments.
Remotely addressing a conference in mid-May in Miami Beach, he said: "I
think we are probably in a recession and that recession will get worse."
In late May, when asked on Twitter whether a recession was coming, Musk said:
"Yes, but this is actually a good thing. It has been raining money on
fools for too long. Some bankruptcies need to happen."
Other companies have cut jobs or are slowing or pausing hiring amid weakening
demand.
Last month, Netflix (NFLX.O) said it had laid off about 150 people, mostly in
the United States, and Peloton said in February it would cut 2,800 jobs. Meta
Platforms (FB.O), Uber (UBER.N) and other technology companies have slowed
hiring.
In June 2018, Musk said Tesla would cut 9% of its workforce as the
then-loss-making company struggled to ramp up output of Model 3 electric
sedans, although data in its SEC filings showed reductions were more than
offset by hiring by year end.
Source: REUTERS