Exclusive: Elon Musk Wants to Cut Tesla's Workforce by 10%

San Francisco, June 3 (Reuters) –

Tesla CEO Elon Musk told in emails seen by Reuters

that he has a “super bad feeling” about the economy and needs to cut about 10 percent of the salaried workforce at the electric vehicle manufacturer.

A message he sent to senior executives on Thursday outlined his concerns and asked them to “pause all hiring globally on a temporary basis.”

The gloomy outlook came two days after the billionaire demanded that employees return to the workplace or leave,

adding to the growing chorus of warnings from business leaders about recession risks.

Tesla shares fell 9% in U.S. trading on Friday following the Reuters report.

The tech-heavy Nasdaq index (.IXIC) fell about 2%.

In another email to employees on Friday,

Musk said Tesla would reduce its salaried headcount by 10%,

as it had become “overstaffed in many areas.” But he said “hourly headcount would increase.”

Musk wrote in the email seen by Reuters: “Note,

this does not apply to anyone who is actually making cars, batteries, or installing solar.”

The annual SEC filing showed

that nearly 100,000 people were employed at Tesla and its subsidiaries at the end of 2021.

It did not break down the number of salaried versus hourly workers.

A comment was not immediately available from the Texas-based company.

Musk has warned in recent weeks about recession risks,

but his email ordering a hiring freeze and staff reductions was the most direct

and most high-profile message of its kind from the head of an automaker, while others have described sky-high demand.

Morgan Stanley analyst Adam Jonas said in a note: “Elon Musk has a uniquely enlightened view of the global economy.

We believe a message from him will carry high credibility.”

Shanghai Lockdown

So far, demand for Tesla vehicles and other electric vehicles has remained strong and many of the traditional signs of a downturn have not materialized – including rising dealer inventories and incentives in the United States.

But Tesla has struggled to resume production at its Shanghai factory after COVID-19 lockdowns caused costly disruptions.

Frank Schoop, analyst at Hanover-based Nord LB, said: “It is always better to implement austerity measures in good times rather than bad ones. I see the statements as an early warning and a precautionary measure.”

Musk’s bleak outlook echoes recent comments from executives including Jamie Dimon,

CEO of JPMorgan Chase & Co., and Goldman Sachs President John Waldron.

Dimon said this week: “There is a hurricane on the road coming our way”:

Inflation in the United States is hovering near a 40-year high and has caused a spike in the cost of living for Americans,

while the Federal Reserve faces the difficult task of curbing demand enough to tame inflation without causing a recession.

It also was not immediately clear what implications, if any, Musk’s announcement would have

for his $44 billion bid to buy Twitter (TWTR.N).

U.S. antitrust regulators cleared the way for the deal on Friday,

sending Twitter shares up 2%. Read more

Several analysts have recently cut Tesla’s price target,

and forecast production losses at its Shanghai factory, which is a hub for supplying China with electric vehicles and for exports.

China accounted for just over a third of Tesla’s global deliveries in 2021,

according to company disclosures and sales data from there. On Thursday,

Daiwa Capital Markets estimated that Tesla had about 32,000 orders pending delivery in China,

compared with 600,000 vehicles for BYD (002594.SZ), its larger electric rival in that market.

Before Musk’s warning, Tesla had about 5,000 job postings on LinkedIn ranging from sales positions in Tokyo

and engineers at its new Gigafactory in Berlin to deep learning scientists in Palo Alto.

It had scheduled an online hiring event for Shanghai on June 9 on its WeChat channel.

Musk’s demand for employees to return to the office faced obstacles in Germany.

A union leader said his plan to cut jobs would face resistance in the Netherlands, where Tesla’s European headquarters is located.

FNV union spokesman Hans Walthie said: “You cannot simply fire Dutch workers,”

adding that Tesla would have to negotiate with a labor union over the terms of any departures.

In a Tuesday email,

Musk said Tesla employees are required to be in the office for at least 40 hours per week,

to shut the door on any remote work. He said “If you don’t show up, we will assume you have resigned.”

Jason Stomel, founder of tech talent agency Cadre, said

that the return-to-office memo may be a way to push people to leave.

“(Musk) knows that a percentage of workers will not come back,”

which he said would be cheaper for Tesla since no termination payments would be needed.

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

Speaking at a virtual conference in mid-May in Miami Beach, he said: “I think we are probably in a recession and that the recession will get worse.”