Tesla to layoff 9% of its workforce, Elon Musk says

Tesla Inc. will let go of about 9% of its workforce in what Chief Executive Elon Musk on Twitter Tuesday called a “difficult but necessary reorg.”

Musk tweeted the email moments after it had leaked to a few media organizations.

Tesla   “has grown and evolved rapidly over the past several years, which has resulted in some duplication of roles and some job functions that, while they made sense in the past, are difficult to justify today," the email read.

The layoffs will “almost entirely” affect salaried employees and no production employees are included as the Silicon Valley car maker focuses on increasing Model 3 production, the email said. Tesla is providing “significant salary and stock vesting” to the employees affected.

Tesla has also decided not to renew a deal with Home Depot Inc.  to showcase Tesla’s solar products in Home Depot stores in order to focus on in-house sales, it said. That tie-in had been hammered out in February.

Analysts at Consumer Edge said they viewed the job cuts as “a positive in helping Tesla track toward profitability later this year.” Model 3 production “is still the primary driver of upside to expectations and shares in 2018,” they said.

Tesla shares rose more than 4% Tuesday, up four of the past five days. The stock pared gains after the layoff news to close 3.2% higher at $342.77, its highest since March 12.

Several key executives have left Tesla in recent months, and Musk had said in May the company was “flattening management structure.”

On Tesla’s first-quarter earnings call, Musk had also referred to a reorganization, linking it to goal of the company’s becoming GAAP profitable and cash-flow positive by the third quarter.

“A shift from constant spending and growth to an acknowledged need for financial sustainability is a big shift” for Elon Musk, said Karl Brauer, an analyst wit Kelley Blue Book. But such statements “only increase the pressure and scrutiny on Tesla” to turn a profit, he said.

The company offered no further comments on the layoffs, referring back to Musk’s email.