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June 22, 2018

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Elon Musk, in search of profit, trims Tesla’s workforce

Image

Courtesy of Tesla Motors / AP

This image provided by Tesla Motors shows the Tesla Model 3 sedan.

Tesla has lost money every year since its founding in 2003. But the automaker’s chief executive, Elon Musk, is pulling out all the stops to end that streak.

In the latest sign, Musk said Tuesday that Tesla would reduce its workforce by about 9 percent, or roughly 3,500 of its 37,500 employees, as part of a companywide restructuring.

The cutbacks come in the midst of a challenging and expensive effort to transform Tesla from a niche producer of electric vehicles to a mainstream automaker, an ambition hinging on its first mass-market offering, the Model 3.

In an internal email that he posted on Twitter, Musk said most of those losing their jobs would be salaried employees. He said the cuts would have no effect on production workers at the company’s car plant in Fremont, California. And he emphasized the quest for profitability.

“What drives us is our mission to accelerate the world’s transition to sustainable, clean energy,” Musk said. “But we will never achieve that mission unless we eventually demonstrate that we can be sustainably profitable. That is a valid and fair criticism of Tesla’s history to date.”

In the first quarter, Tesla recorded a loss of $785 million on revenue of $3.4 billion. And the company consumed $745 million in cash, up sharply from $112 million in the previous quarter.

Alarmed by the cash burn and the slow ramp-up of Model 3 assembly, Moody’s Investors Service cut Tesla’s credit rating in March.

Tesla’s stock ended the day with a gain of more than 3 percent, closing at $342.77, though it had been trading even higher before the announcement.

The automaker is scrambling to streamline and accelerate assembly of the Model 3, which it is counting on for revenue to offset the billions it is spending to develop new models. Last week, Musk said Tesla was making about 3,500 Model 3s a week and expected to increase that to 5,000 a week — the level needed for the company to become profitable — by the end of June.

He said the job cuts announced Tuesday “will not affect our ability to reach Model 3 production targets in the coming month.”