Elon Musk, the CEO of Tesla, has a “very awful feeling” about the economy and wants to reduce approximately 10% of the company’s employment globally, according to an email reviewed by Reuters. The memo, marked “stop all recruiting globally,” was received on Thursday, two days after the billionaire instructed employees to return to work or quit. It’s the latest in a long line of warnings from corporate executives about the dangers of a recession.
According to Tesla’s annual SEC filing, the corporation and its subsidiaries employed about 100,000 workers by the end of 2021. Tesla did not respond to a request for comment right away. Tesla shares tumbled over 3% in pre-market trading in the United States on Friday, while its Frankfurt-listed stock plunged 3.6 percent after the Reuters article. Musk has sent several warnings over the last few weeks on the possibility of an economic downturn; nevertheless, his email ordering a hiring freeze as well as staff reductions was the most direct and publicized statement of its sort to come from the CEO of an automobile manufacturer.
Traditional markers of a slowdown, such as increased dealer inventory and incentives in the United States, have so far failed to materialize for Tesla automobiles and other electric vehicles. However, after COVID-19 lockdowns caused expensive plant downtime, Tesla has struggled to restore production at its Shanghai facility. “Many people share Musk’s negative sentiment,” said Carsten Brzeski, global director of macroeconomic research at Dutch bank ING.
“However, we are not discussing the global recession.” We anticipate a worldwide economic slowdown by the end of the year. The United States will cool, but China and Europe will not recover.” Musk’s pessimistic prognosis reflects previous remarks from leaders such as Jamie Dimon, CEO of JPMorgan Chase & Co, and John Waldron, President of Goldman Sachs. This week, Dimon said that a “storm is just out there down the road heading our way.”
Inflation in the United States is hanging near 40-year highs, which has led to an increase in the cost of living for Americans. Meanwhile, the Federal Reserve confronts the challenging goal of reducing demand enough to cut inflation without precipitating a recession. This is a difficult undertaking.
In the short email reviewed by Reuters, Musk, the world’s wealthiest man, did not expand on the reasons for his “very awful vibe” about the economic prospects. Several analysts have lately lowered their price forecasts for Tesla, citing slower deliveries and decreased production at the company’s Shanghai facility, which serves as a center for providing electric cars to China and for export.
According to business filings and statistics on sales in China, China accounted for slightly over a third of Tesla’s worldwide deliveries in 2021. According to Wedbush Securities analyst Daniel Ives, Musk and Tesla look to be “trying to get ahead of a slower delivery ramp this year and protect profits ahead of an economic downturn,” in a tweet.
Tesla had approximately 5,000 job listings on LinkedIn before Musk’s warning, ranging from sales in Tokyo to engineers at the company’s new Berlin manufacturing to deep learning scientists in Palo Alto. On June 9, it announced an online recruiting event for Shanghai on its WeChat channel.
Musk informed employees on Tuesday that they could either return to work or quit the firm, a demand that has already been met with resistance in Germany, where the company has new manufacturing. In the email, Musk said, “Everyone at Tesla is obligated to spend a minimum of 40 hours in the office every week.” “We’ll think you’ve quit if you don’t show up.”
In recent statements, Musk has alluded to the possibility of a recession. “I believe we are definitely in a recession, and that recession will become worse,” Musk stated at a conference in Miami Beach in mid-May. “It’ll probably be some rough going for, I don’t know, a year, maybe 12 to 18 months, is normally how long it takes for a correction to happen,” he continued.
When asked whether the economy was nearing a recession by a Twitter user in late May, Musk said, “Yes, but this is really a positive thing.” For far too long, it has been showering money on idiots. Some bankruptcies are necessary.” Musk also got into a Twitter dispute on Thursday with Australia’s Scott Farquhar, who mocked the order in a series of tweets, calling it “something out of the 1950s.”
In response to a tweet by Farquhar encouraging Tesla staff to seek remote work jobs, Musk tweeted: “recessions serve an important economic cleaning role.”
In reference to the return-to-work order, Jason Stomel, founder of the IT employment firm Cadre, was quoted as saying, “I believe there’s potential that this is simply a disguised layoff.” This would imply that the company is able to get rid of individuals via attrition or without having to really have a layoff. “Elon Musk understands there’s a proportion of people who won’t come back,” he added, adding that it would be less expensive since no severance would be required.