Tesla to cut staff pay by up to 30 percent, furlough workers

Internal memo says workers not assigned to critical tasks and who cannot work from home will be furloughed without pay.

Tesla Inc. Gigafactory China
Tesla said it expects to resume normal production levels at its US facilities in May [File: Qilai Shen/Bloomberg]

Tesla Inc will reduce employees’ salaries as much as 30 percent from April 13 and furlough non-critical staff to cut costs as it shuts down some operations because of the coronavirus pandemic.

In the US, the salary cut is 30 percent for vice presidents and above, 20 percent for directors and above, and 10 percent for others, according to an internal memo seen by Bloomberg and electric vehicle news portal Elektrek.

Workers outside the US will see similar reductions. Employees who have not been assigned to critical tasks and who cannot work from home will be furloughed without pay, though they will keep healthcare benefits.

Carmakers are trying to conserve cash with sales plunging towards zero amid plant shutdowns and stay-at-home orders. The virus outbreak hit just as Tesla was ramping up the production of its Model Y crossover, accelerating output at its new Shanghai plant and forging ahead with plans to build a new facility near Berlin.

“This is a shared sacrifice across the company that will allow us to progress during these challenging times,” Tesla said in the memo.

A Tesla representative declined to comment.

Tesla agreed to idle US production in March in accordance with authorities’ orders, choking off the supply of cars to customers. The electric vehicle maker expects to resume normal production at its US facilities on May 4, according to the memo.

Even after reopening its facilities, Tesla will probably need about two weeks to ramp up production again, analysts at Credit Suisse Group AG said in a note. Tesla had about 30,000 cars in its inventory at the end of the first quarter, which is sufficient to meet weakened demand, the analysts said.

The company has about 56,000 employees, according to a recent company email. Its sole US car production facility is in Fremont, California, where current stay-at-home orders extend until May 3.

At its Nevada gigafactory, Tesla is reducing on-site staff by 75 percent, according to the county where the plant is located. The facility produces battery packs and electric motors with partner Panasonic Corporation.

Tesla’s Shanghai plant, meanwhile, recovered from a virus-related shutdown faster than many in the industry, helped by aid from local authorities. After resuming operations on February 10, the factory – Tesla’s only outside the US – has surpassed the capacity it had before the shutdown, reaching a weekly production of 3,000 cars, the company said last month.

Though down from a February peak, shares of Tesla are still up 30 percent this year.

Source: News Agencies