Elon Musk pulls back on Tesla's job cuts plan — sort of

CNN/Stylemagazine.com Newswire | 6/6/2022, 12:28 p.m.
Tesla may not be cutting staff after all. That's according to a tweet from its ever-mercurial CEO Elon Musk — …
According to a tweet from its ever-mercurial CEO Elon Musk, Tesla may not be cutting staff after all, and pictured, newly manufactured Tesla electric cars in Southampton on April 20, 2020. Mandatory Credit: Adrian Dennis/AFP/Getty Images

Originally Published: 06 JUN 22 11:35 ET

By Chris Isidore, CNN Business

(CNN) -- Tesla may not be cutting staff after all.

That's according to a tweet from its ever-mercurial CEO Elon Musk — an apparent contradiction to two emails he sent staff last week about planned job cuts and a hiring freeze, which pushed Tesla shares lower.

Last Thursday, according to a Reuters report, Elon Musk sent an email to staff saying the company would freeze hiring as part of a move to cut staff by 10% — explaining that he has a "super bad feeling" about the economy.

He sent a follow-up email, according to Musk-centered site Tesmanian, elaborating that the company would increase hourly headcount but reduce "salaried headcount by 10%, as we have become overstaffed in many areas," adding that :this does not apply to anyone actually building cars, battery packs or installing solar."

Then, on Saturday, Musk tweeted that the company's "total headcount will increase, but salaried should be fairly flat." Yet hours later, Musk said on Twitter that the Tesmanian story was "accurate."

It's not clear whether Musk equates a 10% salaried headcount cut with "fairly flat": As has long been the case at Tesla, it did not respond to a request for formal comment on the reported emails.

Reuters' report about the email last week sent Tesla shares down 9% on Friday, but on Monday, they were up 2.8% in early trading on Musk's sort-of walk-back. Another factor affecting the stock: Musk also threatened Monday to walk away from his proposed purchase of Twitter. Tesla shares have been hurt by Musk's interest in Twitter as some investors have worried it would distract him from running the electric automaker, or force him to sell more Tesla shares to raise cash.

'It clearly backfired'

The initial job cuts email was a "mini-disaster" for Tesla shares, said Dan Ives, tech analyst for Wedbush Securities. "Any hint of economic softness from an influential person like Musk will be heard around the world," he said.

Likely among Musk's chief concerns is the Covid lockdowns in China, which have resulted in a temporary shutdown of Tesla's Shanghai plant and a sharp fall in industrywide auto sales in the world's largest car market.

Despite those challenges, however, Tesla is still enjoying more demand for its cars than it can supply, Ives said.

"Last week's email set off nervousness with investors around demand for no reason and put pressure on the stock," he said. "You can see why Musk is not waking up a good mood before he sent that email. That said, he probably he should have had coffee before he sent it. It clearly backfired."

Tesla had about 100,000 employees at the end of 2021, according to company filings. There are about 5,000 job openings at Tesla listed on LinkedIn, and the company is in the process of ramping up production at two recently opened factories outside of Berlin and Austin.

In addition to the emails about staffing levels, Musk sent an email to salaried staff last week saying Tesla office workers must work in the office at least 40 hours a week — and if they don't, the company will consider them as having resigned.

Surveys show that a majority of workers would like the option of working remotely rather coming into the office. The scramble to fill jobs has many companies offering workers greater flexibility to work from home, though Musk clearly is not one of the leaders doing so. Despite signs of a weakening economy, the labor market is still very tight, with employers posting two job openings for every unemployed person looking for work.