The New Plan: Tesla Undergoing Management Weight Loss Program, Reducing Overhead

Matt Posky
by Matt Posky

On Monday, Tesla CEO Elon Musk told employees the company intends to “flatten” its structure. That translates into fewer management executives as the automaker hires as many line workers as possible. Neither should come as a shock to those paying attention. Tesla Motors has bled high-ranking executives for a while now, and the autonomous assembly system that was supposed to revolutionize production hasn’t appeared yet.

Flattening the company’s management structure may be less about cutting costs and more about having no one to fill empty seats. That said, Musk’s announcement placed an emphasis on improving the company’s finances — echoing statements made during an earlier conference call that created some public relations hiccups. So the restructuring plan could be Tesla performing double duty.

“To ensure that Tesla is well prepared for the future, we have been undertaking a thorough reorganization of our company,” Musk said in his memo to staff.

The Wall Street Journal reported the CEO also noted that, despite pressing management like a waffle, Tesla will “continue to hire rapidly in critical hourly and salaried positions to support the Model 3 production ramp and future product development.”

Earlier this month, Musk hinted the automaker would undergo some form of restructuring in the coming weeks after being grilled on its spending. A growing theory among analysts is that Tesla will soon need to raise capital. It’s still spending billions without turning a profit and, while its share price remains high, investor faith has begun to wane.

During the earlier conference call, the subject proved a matter of some frustration for Elon. He seemed impatient when it came to queries about the company’s financial health. That isn’t indicative of underlying problems, though. The CEO may have been having an off day or simply has a plan in place where he won’t need to worry about investors anymore. However, the former hypothesis seems much less likely. With news of a fresh factory intended for the Model Y, along with a bevy of other forthcoming projects, it’s difficult to imagine Tesla not needing some extra cash.

The company is in a weird place. While Musk tells short sellers to kiss off and abandon the stock if you don’t like volatility, the brand is believed to have over 500,000 Model 3 reservations and is generating more volume than ever before. Production problems aside, that has to count for something.

However, as things continue to progress both on Wall Street and the factory floor, something is up at its corporate offices. The company is losing executives at a rate that could be cause for concern. Late last week, it was announced that senior vice president of engineering Doug Field would take a sabbatical. While that doesn’t mean he’s leaving Tesla for good, announcing time off usually precedes a full-on departure.

Matthew Schwall, the company’s main technical contact with U.S. safety investigators, recently left for rival Waymo LLC after Tesla’s row with the National Transportation Safety Board. Jim Keller, who headed the Autopilot development program, left for Intel in April. In March, Tesla verified that two of its top financial executives had abandoned the company — just one month after sales chief Jon McNeill relocated to Lyft.

Clearly, the company needs some good news. Musk claims to have it. Phase one involves axing third-party contracting companies and reducing supplier overhead. During conference call earlier this month, the CEO compared the situation to barnacles on a ship. “We’ve got barnacles on barnacles,” he said. “So there’s going to be a lot of barnacle removal.”

Phase two involves figuring out the manufacturing issues. The company has not delivered as promised when it comes to the Model 3. Production delays remain a serious issue and Musk has been forced to break promises over and over again. However, he claims this will soon be a thing of the past. Currently, he’s leaning on a humanoid workforce to supplement the semi-functional autonomous assembly lines. But Tesla is also working to ensure the machinery functions as intended as soon as possible.

“We’re fixing it fast,” Musk tweeted in response to an Ars Technica article suggesting Tesla Motors was repeating the mistakes of the 1980s by trying to rely on automation. “Hackathon going on right now to fix 2 worst robot production chokepoints. Looks promising.”

[Image: Tesla]

Matt Posky
Matt Posky

A staunch consumer advocate tracking industry trends and regulation. Before joining TTAC, Matt spent a decade working for marketing and research firms based in NYC. Clients included several of the world’s largest automakers, global tire brands, and aftermarket part suppliers. Dissatisfied with the corporate world and resentful of having to wear suits everyday, he pivoted to writing about cars. Since then, that man has become an ardent supporter of the right-to-repair movement, been interviewed on the auto industry by national radio broadcasts, driven more rental cars than anyone ever should, participated in amateur rallying events, and received the requisite minimum training as sanctioned by the SCCA. Handy with a wrench, Matt grew up surrounded by Detroit auto workers and managed to get a pizza delivery job before he was legally eligible. He later found himself driving box trucks through Manhattan, guaranteeing future sympathy for actual truckers. He continues to conduct research pertaining to the automotive sector as an independent contractor and has since moved back to his native Michigan, closer to where the cars are born. A contrarian, Matt claims to prefer understeer — stating that front and all-wheel drive vehicles cater best to his driving style.

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3 of 14 comments
  • Michal1980 Michal1980 on May 14, 2018

    so he wants to raise production numbers, release a new car, a new roadster, a new semi. AND fire a bunch of contractors that employees must vouch for, while firing said employees? Yup, nothing to worry about here. Oh wait, I almost forgot, he wants to reduce cost, plus increase precision 10x.

  • Turf3 Turf3 on May 15, 2018

    Sounds to me like Mr. Musk needs to swallow a bit of his pride, admit he does not know how to make things with mass production, and hire some crusty old farts who do.

    • Tstag Tstag on May 15, 2018

      Tesla either need to buy a car company like Mazda who can help them with their production problems or partner with one.

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