At what can likely again be described as inevitable, Tesla Motors today announced a significant across the board workforce reduction, and the descriptor of challenges that remain will obviously require added operational leadership.  Tesla Motors

Unfortunately, but to little surprise, Tesla Motors today announced plans to cut its overall workforce by 7 percent.

Today’s announcement comes after a 9 percent reduction in mostly salaried workforce in June of 2018.

News of today’s announcement caused the company’s stock to close down nearly 13 percent.

In an early morning email directed to all employees, CEO Elon Musk indicated that the electric automobile producer faces “an extremely difficult challenge”, namely in keeping the company competitive. He warned that Tesla made a lower profit in the most recent quarter.  (Financial results are yet to be announced)

Specific cause is directed at the Model 3 sedan. The CEO stated: “While we have made great progress, our products are still too expensive for most people.”

Acknowledged was that the strategic goal has always been in providing well engineered electric cars for all consumers, and currently, the most affordable offering of the mid-range Model 3 with premium sound and interior is priced at $44,000. The stated goal has always been producing $35,000 Model 3’s at-volume. That goal takes on far more meaning as U.S. incentives associated in buying an electric vehicle wind down in the coming months.

Reporting on the Tesla announcement, The Wall Street Journal cited analysts surveyed by FactSheet as estimating that the average Model 3 selling price was actually $59,000 in the recent quarter.

Moving forward, Musk indicates that Tesla will need to both increase the Model 3 production rate while making manufacturing engineering improvements in the coming months. Considering the pain levels inflicted in initial misdirected and later revised production automation  related to Model 3 production, the challenge seems especially dauting, when considering the new reality of inevitable reductions in production supply network support workers.

Today’s announcement comes days after the recent groundbreaking ceremony for a new Tesla manufacturing facility in China, just outside of Shanghai. In our Supply Chain Matters commentary related to groundbreaking, we openly questioned why Musk again established very aggressive milestones for both completing plant construction and full operational ramp-up of Model 3 production.

Today’s announcement provides far more succinctness as to why the overall sense of urgency for a China manufacturing and augmented supply network presence.


Added Supply Chain Matters Perspectives and Thoughts

Our published commentary related to the June 2018 headcount reduction noted:

This latest development obviously provides a sting to Tesla employees who have been continuously called upon to perform extraordinary tasks and dedicate long hours in order to support current new model product development efforts, production process glitches and extraordinary volume ramps.

Today’s announcement adds even more pain.

We further opined that that Tesla’s new management structure will continue to have a high dependency on existing employees, and in various degrees of talent and expertise to rally and address the ongoing challenges.

Our statements has even more meaning seven months later with in excess of 3000 employees forced to leave.

Declining worker morale has to be an important consideration moving forward as will bonus structures associated with employees that remain.

Musk closed this morning’s email to all employees with the following statement: “I am honored to work alongside you.”

From our lens, a more meaningful and purposeful statement could have been: I am honored to be a part of Tesla and here are the designated new operational leaders whom I have entrusted to shepherd our next critical phase of needed operations, manufacturing and supply chain changes.


Bob Ferrari

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