Tesla takes a speed bump, hits the brakes on hiring

7 months ago by Jeremy Bloom in News

Tesla Motors ($NASDAQ:TSLA) made big news back in October, laying off 700+ workers, just as production was ramping up on the much-heralded Tesla Model 3. At the time, they insisted they were simply cutting sub-standard performers, and this was a regular HR practice for them.

“Like all companies, Tesla conducts an annual performance review during which a manager and employee discuss the results that were achieved, as well as how those results were achieved, during the performance period,” a Tesla spokesman said in a release. “…As with any company, especially one of over 33,000 employees, performance reviews also occasionally result in employee departures. Tesla is continuing to grow and hire new employees around the world.”

But was it? And does it?

If the firings were performance-related, you’d expect that Tesla’s HR department would be very busy for the next few months, hiring like mad to slot new (and hopefully better-performing) workers into those critical job positions. But what the data actually shows (Thinknum data culled from Tesla's website) is a company whose open positions were already decreasing, and then took a sudden nosedive:

If it was standard operating procedure for HR, then maybe it's time for those HR folks to get their own performance review. The whole thing was handled terribly, and came at a terrible time – just as the company was facing assembly-line delays on the new Tesla Model 3, which is supposed to be their breakthrough product.

Hit, or miss?

Amid rumors of quality control issues and bottlenecks, the company missed its production goals for 2017. And many analysts questioned whether it will have any hope of meeting its ambitious target of 500,000 vehicles manufactured in 2018.

So, were the layoffs truly performance-based? Or an attempt to trim expenses to meet investor expectations? Or something else?

CNBC got an earful when they talked to some of the folks who were graced with pink slips.

Among those whose jobs were terminated in this phase, some were given severance packages quickly while others are still waiting on separation agreements. Some terminated employees told CNBC they were informed via email or a phone call "without warning," and told not to come into work the next day.

The company also dismissed other employees without specifying a given performance issue, according to these people.

"Seems like performance has nothing to do with it," one Tesla employee told CNBC under the condition of anonymity. "Those terminated were generally the highest paid in their position," this person said, suggesting that the firings were driven by cost-cutting.

And as Chuck Jones noted at Forbes, “letting go a large number of people for a high growth company doesn’t seem like normal operating mode. No matter what type (meaning positions) are let go this creates disruption in a company.”

So what does Jones think is really going on here?

“…the layoffs may be a way to trim expenses as a way to help the December quarter’s bottom line since this occurred at the beginning of the quarter. If this is one of the reasons (and if it is talked about on the earnings conference call) then it is more likely that analysts will push out when the company starts to generate positive earnings since it shows Tesla is having a harder time getting there just on revenue growth."

Up, or down?

Did it work? Not so much. After rising all year on exuberence and good PR, Tesla's stock started a price slump on... October 17, just as the layoffs were announced. It bottomed out around $300, which is still pretty good, considering it started the year around $200.

But the price had been testing $400 over the summer, and it doesn't look like investors are goinng to push it back up to those heights any time soon.

tesla stock chartTesla's stock performance (by EdgarOnline via NASDAQ)

Together, or separately?

And then, there’s the possibility that it wasn't about either of those things… that the layoffs were really about getting rid of union agitators. 

 “Openly pro-union workers were among those fired this week,” notes the San Jose Mercury News. “Some believe they were targeted.” 

Some... like also the United Autoworkers Union, which is dragging Elon up before the National Labor Relations Board

“I had great performance reviews. I don’t believe I was fired for performance,” Daniel Grant, another pro-union activist, told The Los Angeles Times. “The company didn’t show me or others our most recent reviews when they fired us,” Grant said. “I would like the company to release our full reviews, including peer reviews, to us.”

As Steve Hanley notes at Gas2, “Elon Musk is known to be a difficult person to work for. He demands a lot from his people and he has previously made his displeasure known about the union organizing campaign. He has made it clear that he considers any union activity to be a personal insult to him as he sees himself as the benevolent overlord of the Tesla empire.”

Meanwhile, Musk reports that he’s working on custom AI chips. Perhaps rather than deal with all those pesky workers with their demands for reasonable wages and working conditions, he plans to replace them all with self-driving AI robots?

Jeremy Bloom

When Jeremy Bloom isn't writing about energy, the environment, or the amazing strangeness of modern life, you can find him drinking really good single malt whisky...

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