Tesla Announced Layoffs to Public Before Telling Employees: Report

Matt Posky
by Matt Posky
tesla announced layoffs to public before telling employees report

On Thursday, Tesla announced it will finally begin delivering the Model 3’s long-awaited base trim to the public through direct online sales. By eliminating storefronts, the automaker believes it can reduce costs — helping to get that pesky profit situation under control.

Unfortunately, reports have emerged that claim those employees had no idea their jobs were on the line. Meanwhile, the company’s share price took a hit in the wake of the announcement, causing its stock to drop significantly. Since last Thursday, more than $8 billion disappeared from Tesla’s market capitalization.

Elon Musk described the store closings as a necessary cost-cutting measure to ensure it could offer the $35,000 version of the Model 3. The company also explained it would be able to reduce prices of all its vehicles by an average of 6 percent by shifting sales online, though Musk admitted a few high-traffic stores would remain open as product showrooms.

According to Bloomberg, that was a shock to many. At least three Tesla employees told the outlet they first heard about the probable layoffs when the automaker published a public blog post Thursday afternoon. The situation was made all the more confusing by the fact Tesla spent considerable time and resources attempting to expand its physical dealer network over the last two years. Prior to the announcement, Tesla had begun training employees to sell solar systems and energy storage solutions.

From Bloomberg:

Until last week, Tesla’s store strategy seemed to be one of expansion. The Palo Alto, California-based company opened 27 new retail and service centers last quarter, resulting in 378 locations worldwide, according to its letter to shareholders. It was the most openings for a quarter since mid-2017.

Tesla also suggested a brick-and-mortar retail strategy was important in its annual report filed Feb. 19, just nine days before Musk announced the pivot to online sales.

“Our Tesla stores and galleries are highly visible, premium outlets in major metropolitan markets, some of which combine retail sales and service,” Tesla said in its 10-K filing. “Opening a service center in a new geographic area can increase demand. As a result, we have complemented our store strategy with sales facilities and personnel in service centers to more rapidly expand our retail footprint.”

That doesn’t mesh, making some investors nervous. Alex Chalekian, founder and CEO of Lake Avenue Financial, which manages more than $150 million in client assets, said his company sold all Tesla stock held for advisory clients on Friday.

“This was a total 180-degree turn,” Chalekian, explained. “Tesla had been talking about expanding stores, and all of a sudden, they are closing them. To me, this signals a huge financial concern and a possible cash-flow issue for Tesla.”

[Image: Tesla]

Join the conversation
2 of 14 comments
  • Master Baiter Master Baiter on Mar 05, 2019

    Companies pretty much have to disclose these types of layoffs publicly before telling employees, as it materially affects the stock price. TSLA is particularly vulnerable to this type of news, as evidenced by the market reaction. Nothing to see here, move along now.

  • Speedlaw Speedlaw on Mar 06, 2019

    The Shorty Ground Force #SGF on Twitter has gone into amazing detail recounting the cash burn and the many interesting things done at TSLA to keep it going.. While I don't have any position in that stock and want to see them succeed, it is....fascinating. Who coulda thought that the traditional car companies actually know something ?

  • Wjtinfwb How does the ICE mid-engine C8 platform work for... anything else? A sedan? SUV? With a mid engine configuration? A mid-engine SUV will have to be Suburban sized to offer the utility of a CRV. GM should dust off the Omega platform designed for the Cadillac CT6 for an SUV/Sedan offering with exceptional handling, Rear or AWD capability and acceptable space utilization. They also need to focus on interior fit & finish, trim choices and high quality final engineering and assembly. What GM doesn't need is another half-baked product with a storied and prestigious badge on the decklid and a premium price on the Monroney. No more Cimarron's, Allante's or X-cars needed to tarnish the reputation of Corvette.
  • InCogKneeToe BUILD It and they will come.By Build It, I mean a Vehicle that the Customer Wants and it works for them. It could be called Chevette for all that that matters. The Mach E's success isn't because it totes the Mustang on it.Just build what people want, the next Caravan/Taurus/Beetle/Maverick (truck).
  • YellowDuck Wait...how do you make a mid-engine crossover? Or even a 4-door coupe? Me not get.
  • 28-Cars-Later Thanks Corey. The head stud job on NOrthSTAR-T was $3K *years ago* as it involves an engine pull so rear wheel arch rust in and of itself isn't a show stopper. I'll be sure to check out the trunk as it may start to add up on deferred maintenance. Supposedly this was garaged so the underneath the rockers etc. should be decent but if those are shot its not gonna work.
  • Mark 2016 Hyundai Sonata Hybrid, G4NG engine with connecting rod bearing issues. Engine needs to be replaced, but Hyundai is denying warranty claim. I have all maintenance records from mile zero. It has been in Hyundai Service department 5 time in 4 months. They added the knock sensor and software update to let you know the engine is about to blow up. They kicked the can down the road doing patch work until the car was past the 120k extended extended warranty. I have that documentation too. So how can I join the class action law suit or find a Lawyer that handles these types of issues?