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Tesla trims 3,000 white collar jobs in an effort to finally appear profitable

The move comes on the heels of blue collar layoffs in October of last year, though it was a smaller number at around 700 people.
Free cash flow is the amount of cash a company generates post-capital expenditures. Image via Bloomberg.

In its entire history, Tesla has only turned a small profit a few times; when it did so, the company pivoted and launched a new model almost immediately, which took it back into the red. 


So what made the company trim 9% of its workforce this week? 

Profitability. 

A least, that’s according to Tesla President Elon Musk. Here’s a screen cap of the announcement that he himself tweeted:

Difficult, but necessary Tesla reorg underway. My email to the company has already leaked to media. Here it is unfiltered: pic.twitter.com/4LToWoxScx

— Elon Musk (@elonmusk) June 12, 2018

A company that is owned by shareholders probably does need to focus on profitability; management’s predictions are that this move will make it so by third quarter of this year. 

The move comes on the heels of blue collar layoffs in October of last year, though a much smaller number at around 700 people. 

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Tesla CEO Elon Musk at a meeting at the White House in Washington, DC, on January 23, 2017. (Photo credit: NICHOLAS KAMM/AFP/Getty Images)

In the midst of these layoffs of both management and non-management, there are more grumblings from people wanting to unionize the place. And in response, the company has come under attack again recently for Musk’s suggestion that employees would lose stock options if they joined the United Auto Workers… when such a threat is in direct violation of labor law. 

Nothing stopping Tesla team at our car plant from voting union. Could do so tmrw if they wanted. But why pay union dues & give up stock options for nothing? Our safety record is 2X better than when plant was UAW & everybody already gets healthcare.

— Elon Musk (@elonmusk) May 21, 2018

The severance package for these laid-off workers hasn’t been announced yet, but Musk’s wording suggests some kind of severance pay and “stock vesting”—the latter could be beneficial if the stocks are immediately liquefiable, but stocks are worthless if the company doesn’t survive. Indeed, stock in the company has decreased in value at least 26% since September. 


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