Elon Musk feels ‘super bad’ about economy, needs to cut 10% of Tesla jobs

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Tesla CEO Elon Musk said in an email to executives that he had a “super bad feeling” about the economy and needed to cut the electric car maker by about 10%, Reuters saw of jobs.

Thursday’s message, titled “Global Hiring Pause,” comes two days after the billionaire told employees to return to work or leave and adds to growing warnings from business leaders about the risk of a recession.

Tesla employed nearly 100,000 people at the company and its subsidiaries by the end of 2021, according to its annual filing with the Securities and Exchange Commission.

The company could not be immediately reached for comment.

Shares in Tesla fell nearly 3 percent in U.S. premarket trading on Friday after the Reuters report, and shares in Frankfurt fell 3.6 percent. U.S. Nasdaq futures turned negative, down 0.6%.

Musk has warned of the risk of a recession in recent weeks, but his emails ordering a hiring freeze and layoffs are the most direct and public message from the automaker’s boss.

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Demand for Tesla vehicles and other electric vehicles has remained strong so far, and many traditional indicators of a downturn — including rising dealer inventories and U.S. stimulus — have failed to materialize.

But Tesla has struggled to restart production at its Shanghai factory after the Covid-19 lockdown forced a costly shutdown.

“A lot of people share Musk’s bad feeling,” said Carsten Brzeski, global head of macroeconomic research at ABN AMRO ING. “But we’re not talking about a global recession. Towards the end of the year, we expect the global economy to cool. The U.S. will cool, while China and Europe will not recover.”

Musk’s bleak outlook echoes recent comments by executives including JPMorgan Chase CEO Jamie Dimon and Goldman Sachs President John Waldron.

“The hurricane is on our way,” Dimon said this week.

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U.S. inflation is hovering at a 40-year high and pushing up the cost of living for Americans, while the Fed faces the difficult task of controlling enough demand to contain inflation without triggering a recession .

According to Forbes, the world’s richest man, Musk did not detail the reasons for his “super bad feeling” about the economic outlook in a brief email from Reuters.

Some analysts recently cut their price targets for Tesla, predicting slower deliveries due to the lockdown in China and production losses at its Shanghai plant, a hub for supplying electric vehicles and exports to China.

China will account for just over a third of Tesla’s global deliveries in 2021, according to the company and sales figures released there.

Wedbush Securities analyst Daniel Ives said in a tweet that Musk and Tesla appear to be “trying to stay ahead of this year’s supply slowdown and protect margins from a slowing economy.”

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“Pause all settings”
Before Musk’s warning, Tesla posted about 5,000 jobs on LinkedIn, ranging from a sales representative in Tokyo, an engineer at the new Gigafactory in Berlin to a deep learning scientist in Palo Alto. It has scheduled an online recruitment event in Shanghai on June 9 on its WeChat channel.

Musk’s call for employees to return to the office has been resisted in Germany.

“Everyone at Tesla is required to be in the office at least 40 hours a week,” Musk wrote in an email Tuesday. “If you don’t show up, we’ll assume you’ve resigned.”

Musk has repeatedly pointed to the risk of a recession in recent comments.

At a conference in Miami Beach in mid-May, Musk said remotely: “I think we’re probably in a recession, and it’s going to get worse.” He added, “It’s probably going to be tough, I Don’t know, a year, maybe 12 to 18 months, is usually how long it takes for a correction to happen.”

In late May, when a Twitter user asked if the economy was nearing a recession, Musk said: “Yes, but it’s actually a good thing. Been throwing money at fools for too long. There has to be some bankruptcy.”

Musk also got into a Twitter spat Thursday with Australian tech billionaire and Atlassian Plc co-founder Scott Farquhar, who mocked the back-to-office policy as “like something out of the 1950s.”

Musk tweeted that “recession has acted as a vital economic cleanse” in response to a tweet by Farquhar encouraging Tesla employees to investigate his remote work.

Jason Stomel, founder of tech talent agency Cadre, said of the return-to-workplace policy: “I think there’s a chance it’s just a covert layoff, which means they’re able to help people who have attrition to get out, or there’s a layoff, And actually don’t have to.”

“(Musk) knows that a certain percentage of workers won’t come back,” he said, which would be cheaper because severance pay would not be required.

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