Tesla Lays Off 9% Of Workforce, Declines To Renew Home Depot Contract

Tesla Inc TSLA CEO Elon Musk confirmed Tuesday that the company will terminate 9 percent of employees as part of a “difficult but necessary” reorganization.

What Happened

“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,” Musk said in a company email that he later published on Twitter.

The cuts to be announced this week will primarily affect salaried workers and include no production associates, which Musk said ensures Tesla’s ability to achieve Model 3 targets. Notably, the firm will continue to hire in certain areas, particularly production.

Why It's Important

The layoffs are meant to advance management's previously stated goal to flatten management, reduce costs and drive Tesla closer to profitability. The latter goal will in turn address criticisms of Tesla’s financial health seen by Musk to be “valid and fair.”

The financial benefits may not be immediately recognized, though, as the company is providing “significant salary and stock vesting” to terminated employees proportionate to their tenures.

What's Next

Also in the correspondence, Musk announced the decision not to renew Tesla’s residential sales agreement with Home Depot Inc HD in order to redirect sales to Tesla stores and e-commerce sites. Home Depot shares dropped marginally on the news.

Tesla fell about 2 percent intra-day after touching a high of $354.11 Thew stock traded around $339 at time of publication.

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