Tesla cuts 9% of staff in an effort to bandage its cash hemorrhage

Tesla may be in trouble. After multiple delays of its Model 3 and a heavily stunted production run, many critics have called Tesla’s cash flow into question. Claims of the company’s imminent demise have been thrown around for years now, but these accusations may not be far from the truth. In a memo to his company, CEO Elon Musk stated that the company would be restructuring itself. As a result, 9% of Tesla’s employees have been terminated.

In the memo, Musk points out that the cuts will be made from salaried positions and should adversely affect production of the Model 3, which has already hit multiple roadblocks. While an exact number wasn’t given, current estimates peg the job cuts at a little more than 3,000. These layoffs add to the hundreds made back in October.

Musk also announced that Tesla would be cutting ties with Home Depot, which currently sells Tesla’s solar products. Tesla-branded home solar products will now be sold only at Tesla retail locations and online.

The reason cited for the layoffs is Tesla's growing expenses. As Musk points out in his memo, Tesla has never made an annual profit in its 15 years of life. That bears repeating: Tesla has never made a profit. Regardless of profit, Tesla’s cash flow has been negative for all but 4 quarters over the past 8 years. While this is par for the course for startups like Tesla, the company’s expenditures have been astounding in recent years, routinely topping USD $1 billion annually.

At this point, a reorganization may be nothing more than a stopgap. They’re certainly not making any money by continually missing deadlines and hitting low production numbers. What Tesla needs is a deliverable product, made en masse. If this round of layoffs has anything to show, it’s that you can’t float a company on a promise.

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