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Transportation Businesses The Almighty Buck

Tesla Is Cutting 7 Percent of Its Workforce To Reduce Model 3 Price (cnbc.com) 183

Posted by BeauHD from the slice-and-dice dept.
Tesla CEO Elon Musk announced today that the company would cut 7% of its workforce in order to cut costs as the company prepares to ramp up production and boost margins as they get closer to releasing the long-awaited $35,000 version of the Model 3. CNBC reports: Musk says Tesla faces "an extremely difficult challenge" in making their products a competitive alternative to traditional vehicles, adding that he expects Q4 profit to come in significantly lower than Q3. Five experts weigh in on whether it's a challenge Musk and Tesla can overcome:

- Oppenheimer managing director Colin Rusch agrees with Jed Dorsheimer on Tesla's job cuts, but isn't bullish on what they'll accomplish.
- Canaccord Genuity's Jed Dorsheimer thinks the workforce cut is just fine, calling it "clean-up" after the company's latest push to ramp up Model 3 production came with a wealth of new hires.
- "They're certainly in a better position than they were eight or nine months ago," says ROTH Capital's Craig Irwin. "Where we're going to see pressure on the stock today is the 'copy-paste' expectations of Q3 going through 2019 need to be reset."
- Needham's Raji Gil thinks that Tesla may have overestimated how many people can actually afford a high-end electric vehicle. "Clearly, in my mind, they have an issue with demand," says Rusch, " If you do the math, you have to conclude that 90 percent of the reservations that have been built up over the past couple of years are folks that wanted the standard battery version of the vehicle, which is $35,000."
- Westly Group founder Steve Westly loves where Elon Musk's company is right now, calling Tesla "the iPhone of electric vehicles," and saying they're well ahead of the game when it comes to a quickly-changing auto market.
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Tesla Is Cutting 7 Percent of Its Workforce To Reduce Model 3 Price More

Tesla Is Cutting 7 Percent of Its Workforce To Reduce Model 3 Price

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  • So you lay off 7% last year, then grow 30% (according to Mr. Musk's email), then lay off 7% again?

    Perhaps a little more care should be paid to not hiring more people than your business can support.

    • Re: (Score:2, Insightful)

      by Rei ( 128717 )

      So your view is that a company refining its production line so that it doesn't need as many workers should have - back when more work hours were needed per vehicle -.... just never have hired people? So, what... just wait until a production line is at its maximum efficiency before you actually produce anything, regardless of whether its gross margins were well positive long before that point?

      I sure hope you're not in charge of managing capital for a company.

      • Re: (Score:2, Insightful)

        by Anonymous Coward
        Tesla had a massive layoff 9% in 2018 and another 7% today. What you say doesn't make any sense. A healthy company doesn't have massive layoffs. You are just a Musk fanboy. It might be a good idea to lay off people in order to save a dying company, but it wasn't because of "work hours needed per vehicle". It is the oldest trick that companies pull: layoffs to push the short term margins up to keep the stock price high and the company solvent. Musk thought he could use automation instead of people, because h

      • Re:Maybe cut your terrible management? (Score:5, Informative)

        by MachineShedFred ( 621896 ) on Friday January 18, 2019 @07:07PM (#57984676) Journal

        No, that's not exactly the view. But 6 months ago when there was a 9% layoff the communication at the time was "I also want to emphasize that we are making this hard decision now so that we never have to do this again.”

        Are you saying that Tesla's management sees "never" as being only 5 months? Or is this just outright lying to employees to cover mismanagement?

    • Re:Maybe cut your terrible management? (Score:5, Interesting)

      by Jay Vickery ( 2908369 ) on Friday January 18, 2019 @07:00PM (#57984652)
      This has nothing to do with mis-management. I believe every large company with a large workforce needs to go through and cut 5% or so every now and then. It gives them an easy chance to cut the bottom performers as well as evaluate positions that might be unneeded now. Even companies that are hiring still fire people because the needs of the company change over time with a company like this.

      • Re: (Score:3)

        by khchung ( 462899 )

        This has nothing to do with mis-management. I believe every large company with a large workforce needs to go through and cut 5% or so every now and then. It gives them an easy chance to cut the bottom performers as well as evaluate positions that might be unneeded now. Even companies that are hiring still fire people because the needs of the company change over time with a company like this.

        Obviously you have never worked in any large companies for any length of time.

        Those on the top management have no idea where the bottom performers are, those middle-managers will keep only their lackeys while cutting away anyone who could potentially threaten their position (especially high performers who they cannot dominate), and those first level managers near the bottom only wanted to keep enough hands on the team to do the job so they wanted to keep everyone. So no matter where the decision was made,

      • 1. They just cut 9% less than a year ago.
        2. Arbitrary cutting of jobs by telling each manager that they have to lose X headcount isn't "thinning the dead wood". It's possible for a team to be highly performing and not carrying the water of half-asses.
        3. The people cut aren't necessarily chosen for performance-based reasons. Example: Tesla really doesn't like remote workers, so remote workers are high on the to-cut list regardless of how indispensable those people may be to ongoing operations. Feel free t

    • I don't think more care in hiring works - especially when you need people quick. People can tell you anything and references are rarely responsive or reliable. You have to take your best shot and be willing to clean out the fluff. A 7% layoff after a rapid 30% buildup seems like about the level of true fluff I would expect. Many of the 30% just added aren't even beyond the trial period yet. Now is the time to get rid of those that didn't live up to their spiel.

      In a typical hiring round, I expect about 1 in

    • So you lay off 7% last year, then grow 30% (according to Mr. Musk's email), then lay off 7% again?

      This isn't a RIF, it's a mass firing in disguise. This is typical behavior for large companies. They do a "reduction in force" and let go of all of their dead weight. It's easier on them because there're fewer legal complications. Firing someone is hard. To avoid legal issues you need to meticulously document an employee's problems and work with them to correct it through multiple stages.

      And it's definitely better PR for the company.

      Perhaps a little more care should be paid to not hiring more people than your business can support.

      Peoples' attitude toward their employment change. They become disinterested

    • Re: (Score:2)

      by rtb61 ( 674572 )

      They had extra staff for future expansion but the Chinese production facility means that growth will be in China instead and a far greater number of cars, a whole lot more cars, order of magnitude more. You wont hear all that much out of China until they get closer to production and of course you will hear high volume advertising once they achieve full production.

      Tesla needed China with General Motors and Mercedes both declaring major electric vehicle production lines and more will follow. For Tesla to com

  • 10% at SpaceX... Elon Musk ventures are not smelling as good as they once did :-/ Maybe he's not the savior as once portrayed.
    • Not really, I would call this completely expected. After the crazy ramp up of production their is bound to be more employees then needed as the rate of production levels off and stabilizes.
      Don't be shocked if you see more of this as parts are redesigned to be friendlier to automation, redundancies are reduced, or processes adjusted.
      Workforce adjustments are inevitable, in an undertaking like this. On the plus side, future Gigafactories will see less of this as the production process can be copied from t

    • Re:7% cuts at Tesla... (Score:5, Interesting)

      by Rei ( 128717 ) on Friday January 18, 2019 @07:03PM (#57984660) Homepage

      Tesla dramatically, then laid off ~9% in Q2 (and in Q3 posted a hugely-expectations-beating ER). After Q2, the company steadily expanded by an additional 30%, then now is laying off 7% in Q1. Is this what you call a collapsing company?

      A company's needs change over time. The faster the company grows, the more rapidly its needs change. Open new lines and facilities? You need to hire people. Make those lines more efficient and automated? Well... I guess the "nice" option would be to keep people around that you don't need. But that's not the economically efficient way.

      SpaceX is a great case. SpaceX has been growing very rapidly. They got good at really churning out Falcon 9s - a couple a month. Now, though... what's the point? They're reusing their rockets; they don't need nearly as many of them. Now they're mainly just manufacturing the (much smaller) upper stages, with only the occasional lower stage. What's your plan... should they just keep producing at the same rate for the heck of it? Even though they plan to retire Falcon 9 once BFR is fully operational?

      Layoffs suck. There's no question about that. I was once laid off; I know what it's like personally. But layoffs are also the most efficient way to run a business, which is why they're a normal business practice.

      • Re: (Score:2)

        by AmiMoJo ( 196126 )

        Seems short sighted. They are doing more and more launches, they need more and more disposable upper stages. They can let those skilled staff go, or they can retain them and move them over to upper stage manufacturing.

        Maybe it's the labour laws in the US. In Europe laying them off has a cost beyond the loss of skills.

    • One thing I find interesting, is that all of these 'disruptor' style, innovative companies, tend to inevitably regress the the standard corporate playbook. Same management structure, same PHB's, same buildup of bureaucracy, emphasis on quarterly numbers, etc.

      It seems for a time, if you can collect the right staff of, smart, excited, properly motivated, and compensated people, you can get great things done. But soon enough those folks move on because the comp is better somewhere else, or a crappy boss is i

      • They teach PHBs at business school to do layoffs for no reason other than to get noticed by their peers who have also been taught to do layoffs. If you have ever been in one of these episodes (I have but not laid off myself) it is done by senior managers who do not have a clue what people are actually doing or what needs to be done (as they never bother to find out), and the people laid off are not the less effective workers but rather the choice is random. In particular incoming managers like doing lay

    • What is musk but an overactive fart?
  • and boost production?

    If they've gotten the kinks with their automation processes worked out yeah, that'll work. It's 7%, so it wouldn't surprise me either. That's a small enough (and specific enough) number that I could believe they fixed one of their broken automation processes.

    We should probably start figuring out what we're gonna do with all the folks laid off. Assuming this works out then if Tesla can do it the other car companies can. Oh well, guess all those laid off blue collar guys can go be
  • According to wikipedia, they have about 45k employees (2018). So about 3k. Maybe about a 100 million annual savings (give or take many millions)? Musk and Tesla together are set to pay $40 million in fines because of the "I have a buyer" tweet - just a single tweet. Maybe the other 60 million remaining (from firing 7%) is to pay for future tweets.

    • That's why it is generally a good idea not to *break the law*.

      • Over a 1000 people and their families will suffer,
        due to a single Tweet, sent as what, a jest?
        by the owner.

        Shameful.

        How many of these people, would have defended the company, and Elon, until now?

        How many thought themselves: Core Team. Winners.

        This is like watching a car crash in slow motion.

        Tragic.

  • Electric Cars Need a Tax Credit (Score:5, Insightful)

    by SmaryJerry ( 2759091 ) on Friday January 18, 2019 @07:12PM (#57984716)
    Electric is the future for a clean environment. We absolutely need a new tax credit to keep manufacturers producing and selling more electric cars. China is years ahead of the U.S. is solar already and will end their dependence on fossil fuels much sooner than the U.S. If the U.S. doesn't catch up now it will be left with a failing economy and dying earth.

    • Re: (Score:2)

      by jeremyp ( 130771 )

      Cars (electric or not) are not the future. The environmental damage caused by making a Tesla is just as bas as the damage caused by making fossil fuelled cars. If you are concerned for the environment, you'd be reducing the need for cars of any sort.

  • This doesn't make sense. And I am a Tesla fan. (Score:3)

    by BlueCoder ( 223005 ) on Friday January 18, 2019 @07:17PM (#57984736)

    Their problems right now are in production. You lower the price to get more people to buy your product. But demand already exceeds supply.

    This doesn't made sense unless they are trying to do a quasi ponzi scheme through getting more money from more people paying the prepaid down-payment.

    At this point I am beginning to doubt Tesla. They have a great product. But for all their troubles their assembly line should be finished as they have had more than enough time. How do other car manufacturers do it and how did the Japanese start their companies after us Americans if it's this hard? I'm not buying it.

    I think the truth is the required performance batteries are hard to manufacture at the advertised price point. They are trying to leverage presale numbers to satisfy their investors and expecting a magical manufacturing breakthrough. I think they need a new CEO to put on the breaks and realistically raise prices and or do a limited bankruptcy.

    One solution I suggest is selling the auto bodies of their cars without the batteries. Ditch the auto driving feature into another company and let people hack their own cars and hence assume full liability. They are attractive car bodies. Is there no way to retrofit them for a fuel cell engine? Bring the fun back.

    • Re: (Score:3, Insightful)

      by tomhath ( 637240 )

      The market for large luxury cars is too small to be profitable. Tesla kept bragging how they were the leader in that niche, but they were only the leader because other manufacturers had abandoned it.

      Now Tesla needs to make cars at a much lower price point. But they are being eaten by fixed costs in a low profit margin market.

    • Re: (Score:3)

      by Kjella ( 173770 )

      Their problems right now are in production. You lower the price to get more people to buy your product. But demand already exceeds supply.

      Tesla has been shipping all the $50k+ orders when most people want the $35k car Musk promised. There's no telling exactly how much backlog Tesla has at the price points they're actually shipping, but it's probably a whole lot less in volume and when your skimming off the top your margins will get progressively worse. They know there's a lot of untapped demand at a lower price point, but they need to be able to turn a profit on them too. Their guidance has been pretty clear that they sold a lot of pimped out

      • Re: (Score:3)

        by AmiMoJo ( 196126 )

        They made some mistakes that are making it impossible to reach the $35k target.

        For example, they stuck with cylinder cells when everyone else is moving to pouch for lower cost and increased density. Their volume has helped them stay competitive until recently, but they are falling behind now.

        The Model 3 uses a lot of custom hardware instead of off-the-shelf parts, for example in the drivetrain. They thought it was essential to making a good, efficient EV, and to be fair it is still a market leader. But the

        • The Model 3 uses a lot of custom hardware instead of off-the-shelf parts, for example in the drivetrain. They thought it was essential to making a good, efficient EV, and to be fair it is still a market leader. But the competition is more than good enough, and crucially a lot cheaper.

          Their new motor is better than everyone else's, and not much more expensive. The only major physical difference in construction between it and everyone else's designs is that it uses [constructed] monopolar magnets. Have they given away the patents on that yet?

          • Re: (Score:2)

            by AmiMoJo ( 196126 )

            Is it better? It doesn't seem to be any more efficient than the Kia/Hyundai ones. Their cars only use a little more energy because they a CUV shape, the drivetrain seems to be pretty similar. I guess the M3 has more power, but that's not helping them get to their $35k price point.

            • Is it better? It doesn't seem to be any more efficient than the Kia/Hyundai ones.

              It's smaller for a given output, and it should be slightly more efficient based on its basic design.

              • Re: (Score:2)

                by AmiMoJo ( 196126 )

                Okay... But it's still more expensive and they haven't even got to $35k yet, while other manufacturers are already below that level with better range and features.

                The Model 3 is a very strange car. Parts are clearly engineered to keep costs down, like the extremely spartan interior. Yet other stuff is not, and it's really hurting them. They ended up a long way from their target price, and with a car that won't be very competitive if they can every get it down to that level (only ~200 mile range, extremely b

                • The only excessively under optimized part of the model 3 is the unibody. And there is literally software that will do that, and they may well fix it for the Chinese plant, then bring the changes home once they work out the new assembly line. People aren't lining up to buy leafs and Konas.

                  • Re: (Score:2)

                    by AmiMoJo ( 196126 )

                    Actually the Kona and Niro are basically sold out this year. The Leaf isn't on sale yet and the price looks like a mistake (£51 cheaper and there would be no road tax), so we shall have to see but it does look a bit kak.

    • Re: (Score:2)

      by leonbev ( 111395 )

      In defense of Tesla, it doesn't seem that any other major car company has been able to release a reasonably priced (under $35,000) electric car with decent (over 200 mile) range, either.

      • The Chevy Bolt is close, at $36,600 starting price and a 238 mile range. Turns out it's expensive to build big battery packs.

    • I think they need a new CEO to put on the breaks and realistically raise prices and or do a limited bankruptcy.

      Tesla is only successful because they have been an endless hype machine, and that is largely due to Musk's idiotic/brilliant PR stunts. If he leaves, Tesla is as good as dead.

  • Thought so, it's not rocket science.

  • Cars of similar class to the model 3 cost about $10k less than what the model 3 is going for.

    Given that most people spend, on average, about $1200 to $1500 per year on gasoline, it could take up to almost 9 years before you'd even *start* to see any return on that investment over and above what you would have spent on an ICE vehicle, and that's further assuming that your electricity usage with an EV is somehow negligibly impacted.

    Oh, and that 9 years is complicated by the fact that you probably have to

    • For most people electricity costs are tiered. I know this is adjusted for peak hours during the day, but if majority of people in a region go to EV cars, then peak demand will shift to the PM hours when people get home to work. Seems like the economics are shifting and maybe not even as good as what seems true today.

      Even so, I think EV vehicles are worth pursuing, but I do think they are luxury items and will remain so for another 5 maybe 10 years.

      • If the battery costs about $8K, and the electric motors should be cheaper than an ICE, I would expect a surcharge of about $4K, not $10K.

        The trouble for Telsa is when battery prices halve again, all the big manufacturers will be making electric cars, and they have experience at keeping costs very low.

      • I know at least for Southern California Edison here in Ventura, we have tiered pricing [sce.com] based upon consumption - not time of day. I'm in zone 6, so my allocation for my baseline is 9.6 kWh per day.

        Assuming I had a P85, and I drive 30 miles per day, I'd use up pretty much my entire allocation just for my car (85 kWh battery, ~300 mile range, so about 8.5 kWh for a 30 mile trip). My baseline is at $0.18 per kWh; my car would use all that. Then my home would pay $0.23/kWh for power. If I drove some long mil

    • You've missed a massive cost sink for ICE cars: Maintenance.

      I've now got a few friends with EVs, and they don't really do maintenance. Rotate the tires every now and then, add some washer fluid, and that's about it.

      EVs don't have engines, radiators, exhaust systems, or transmissions, and the regenerative braking is extending brake life to 100k+ miles. They are seriously simplified vehicles, and those cost savings just go up with time, when ICE parts would be starting to near their end of life.

      I've got a 14 year old car which has always been relatively cheap, but I know that in the next few years I need to drop many thousands of dollars into preventative maintenance that I wouldn't have to put into an EV. I need to fix the heat shield, drop a couple grand into the exhaust, new plugs and wires, a radiator flush, new brakes, etc. etc. And that's what I know. I don't know exactly how good the engine, coolant, and transmission systems are.

      I'd happily take none of those but a scheduled battery change every 8-10 years.

      • Electric motors, steering components, suspension components, brakes, air conditioning- all these systems are found in Teslas and will wear out. The question is when. I agree that there are fewer systems to maintain, but battery replacements won't be your only problem!

      • Maintenance for newer ICE cars is pretty minimal; my wife's 2015 Mustang needs an oil change every 8K miles. Discounting tires (which all cars will consume at about the same rate, assuming the same use/abuse), brake system flush (which needs to be done ever 3-4 years - regardless of type of car which means EVs as well), and assuming we'll need to do brakes in about another 14K miles (based upon current wear, that's at 50K miles), we're spending about $7 per month in maintenance. Oil change is $20, radiato

      • EVs don't have engines, radiators, exhaust systems, or transmissions,

        They do have radiators, because they have cooling systems. Unless they're a Leaf, which sucks. But the new Leaf will have a cooling system, so it will suck less. It also lets you use waste heat to heat the cabin, which makes it cheaper to operate during periods where the weather is cold, and the battery is producing heat. Also, there are benefits to cooling not just the battery, but also the motor and even the motor driver, so they can potentially have a more complex cooling system than a basic ICE auto. Th

  • They expanded too fast hired too many hands when it was the crunch time. Now that crunch is over, they are being retrenched.

    That is one advantage of humans over robots. Robots cost too much initial cost, once installed the running cost is low. Humans can be hired quickly and made to adapt to changing and varying demands quickly. They are adaptable, but once the job is done, they can be sent home.

    Tesla is still under serious pressure for cash and it is not able to tap into the capital markets. It needs to

  • Next to Solyndra employment at Tesla is booming.

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