Musk feels ‘super bad’ about economy, has to cut 10% of Tesla jobs

Tesla CEO Elon Musk has a “super bad feeling” about the economy and should cut about 10% of the electric car maker jobs, he said in an email to executives seen by Reuters.

The message, sent Thursday and titled “pause all hiring worldwide,” came two days after the billionaire told staff to return to the workplace or leave, and adds to a growing chorus of warnings from company leaders about the risks. of a recession.

Tesla employed nearly 100,000 people at the company and its subsidiaries at the end of 2021, according to its annual SEC filing.

The company was not immediately available for comment.

Tesla shares fell nearly 3% in US pre-market trading Friday and Frankfurt-listed shares fell 3.6% after the Reuters report. US Nasdaq futures NQcv1 turned negative and were down 0.6%.

Musk has warned of the risk of a recession in recent weeks, but his email ordering a layoff and cuts was the most direct and high-profile message of its kind from the head of an automaker.

So far, demand for Tesla cars and other electric vehicles has remained strong, and many of the traditional downturn indicators — including increasing dealer inventories and incentives in the United States — have failed to materialize.

But Tesla has struggled to restart production at its Shanghai factory after COVID-19 lockdowns caused costly plant outages.

“Musk’s bad feeling is shared by many people,” said Carsten Brzeski, head of macroeconomic research at the Dutch bank ING. “But we’re not talking about a global recession. Towards the end of the year we expect a cooling of the global economy. The US will cool down, while China and Europe will not recover.”

Musk’s bleak outlook mirrors recent comments from executives, including Jamie Dimon, the CEO of JPMorgan Chase & Co, JPM.N and John Waldron, president of Goldman Sachs.

A “hurricane is right there on the road heading our way,” Dimon said this week.

Inflation in the United States is hovering at its highest point in 40 years and has led to a rise in the cost of living for Americans, as the Federal Reserve faces the difficult task of dampening demand enough to curb inflation without a cause a recession.

Musk, the richest man in the world according to Forbes, did not elaborate on the reasons for his “super bad feeling” about the economic outlook in the short email from Reuters.

A number of analysts have recently lowered price targets for Tesla and predict slower deliveries due to Chinese lockdowns and lost production at the Shanghai factory, a hub that supplies electric vehicles to China and for export.

China accounted for just over a third of Tesla’s global deliveries in 2021, according to the company’s disclosures and data on sales there.

Wedbush Securities analyst Daniel Ives said in a tweet that it appeared Musk and Tesla were “trying to get ahead of slower delivery times this year and preserve margins in anticipation of an economic slowdown.”

‘Pause all hires’

Before Musk’s warning, Tesla had about 5,000 job openings on LinkedIn, from sales in Tokyo and engineers in its new Berlin gigafactory to deep learning scientists in Palo Alto. It had scheduled an online recruitment event for Shanghai on June 9 on its WeChat channel.

Musk’s demand for staff to return to the office has already faced backlash in Germany.

“Everyone at Tesla is required to spend at least 40 hours a week in the office,” Musk wrote in his email on Tuesday. “If you don’t show up, we’ll assume you’ve resigned.”

Musk has repeatedly pointed to the risk of a recession in recent comments.

At a remote conference in Miami Beach in mid-May, Musk said, “I think we’re probably in a recession and that recession is going to get worse.” He added: “It will probably be hard to, I don’t know, a year, maybe 12 to 18 months, is usually the amount of time it takes for a correction to take place.”

In late May, when a Twitter user asked if the economy was approaching recession, Musk said, “Yeah, but this is actually a good thing. Money has been raining on fools for too long. There must be a few bankruptcies.’

Musk also had a Twitter spat on Thursday with Australian tech billionaire and Atlassian Plc TEAM.O co-founder Scott Farquhar, who ridiculed the back-to-office directive as “like something out of the 1950s.”

Musk tweeted: “Recessions serve a vital economic cleansing function,” in response to a tweet from Farquhar encouraging Tesla employees to look at his remote work positions.

Jason Stomel, founder of tech talent agency Cadre, said of the return-to-work directive: “I think it’s possible that this is just a covert layoff, meaning they may be able to get rid of people with attrition, or without actually having to do it. have resigned.’

“(Musk) knows there’s a percentage of employees who just don’t come back,” which he says would be cheaper because no layoffs would be necessary.

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