Tesla Inc.is laying off about 3,600 white-collar workers as it slashes costs in an effort to become profitable.
On Tuesday, Tesla shares rose as much as 6.9 percent to a 3-1/2 month high of $354.97, before paring gains on news that the electric carmaker would cut 9 percent of its staff, or several thousand jobs, across the company as it seeks to reduce costs.
The cuts to be announced this week will primarily affect salaried workers and include no production associates, which Musk said ensures Tesla's ability to achieve Model 3 targets. He said Tesla's rapid growth in recent years contributed to the duplication of roles and creation of jobs that the company could no longer justify.
Tesla is shedding 9% of its workforce Musk said the moves would help the company become profitable Close
As of Tesla's annual filing in December, the automaker had 37,543 full-time employees.
Musk goes on to acknowledge that while profitability has never been the electric automaker's strong suit, the company can not go on ignoring the inefficiencies in its workforce if it hopes to achieve its environmental and social goals. Of late, it has faced questions about its ability to ramp up production, especially of its Model 3, the lower-priced sedan the company is counting on to drive sales.
Musk tried to get out ahead of bad press and leaks by simply tweeting out the letter he sent to employees explaining the layoffs.
"That is a valid and fair criticism of Tesla's history to date", Musk said. Tesla is up 11.3% this year. "It is very hard to say goodbye", the CEO wrote.
Musk cast the layoffs as part of a "comprehensive organizational restructuring", one goal of which is to "flatten our management structure to help us communicate better, eliminate bureaucracy and move faster". Those who are being let go are being informed of the change this week, we're told, and will be offered salary and stock options based on how long they were with the company.More news: New disclosure shows growing Kushner wealth, debt
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