Elon Musk CEO of Tesla has an intuition that the economy may crumble and that’s why he wants to cut 10% per cent Tesla staff.
It was mentioned in an email which was sent to his executives and where he told them to stop hiring. Also, another email which was sent two days back asked the staff to return to the workplace and put 40 hours every week at the workplace.
Musk also said Tesla will reduce salaries by 10% because of its overstaff problem, however, it will increase its hourly headcount. Tesla employs almost 100,000 salaried and hourly workers.There has been no comment in the official capacity from Tesla.
Elon Musk has been talking about recession lately but his recent emails to put the advice in the act. It’s a troubling thing if a big car maker is sensing fragility in the economy. As Adam Jonas, an analyst at Morgan Stanley added that given Elon’s position, a message from him carries high credibility.
Demand for the Tesla electric vehicles has been very strong so far and there has been no sign of a downturn at least in the United States of America.
On the other hand, Tesla has been struggling to restart its production at its Shanghai site after Covid 19 lockdowns. “It is always better to introduce austerity measures in good times than in bad times. I see the statements as forwarding and a precautionary measure,” said Hanover based NordLB analyst Frank Schwope. Warnings have also been coming from executives of JP Morgan chase & Co CEO JAMIE DIMON and Goldman Sachs President John Wakdron.
The United States has been facing high rates of inflation and that has caused an increase in the cost of living in America. Bank have the difficult task to dampen demand to control the inflation while not causing a recession.
Moreover, analysts have been cutting price targets for Tesla, forecasting lost output at it’s Shanghai plant. China is one of the biggest customers for Tesla, accounting for one-third of global deliveries. Tesla had about 32,000 orders awaiting delivery in China, compared to 600,000 vehicles for BYD, which is its EV rival in the market.
Tesla had almost 5,000 Job posting on LinkedIn before Musk’s warning. An online event was scheduled for hiring in Shanghai.
Pushback to Elon Musk:
Union leaders in Europe have come against his decisions. His decision to cut jobs is facing resistance in the Netherlands which is Tesla’s European headquarter. FNV union spokesperson Hans Walthie commented “You can’t fire Dutch workers”, adding that they need to negotiate with a labor union in case of cut off of jobs.
His email suggesting 40 hours a week requirement, is being seen in the light it is an effort to push people to resign added Jason Stomel, founder of tech agency Cadre. He also added that Musk is aware that a percentage of worker is not going to come back and in that case, it would be cheaper for Tesla because no severance would be needed.
Musk on recession:
Musk commented in Thursday that relying a Twitter user that recessions are a vital part of the economy to remove the inefficient cogs in the machine to make the functioning smooth. He also added that Covid protocols and work from home have given people impression that they don’t need to work hard, the recession will bring a rude awakening for them.
Is the world heading into a recession?
The pace of economic activity has indeed slowed down but it doesn’t indicate to a recession necessarily. Major economies are still recording positive growth rates. However, coming months are going to be a bumpy road as there are signs of a possible downturn.
Governments have already started working on their respective economies to set them on a development path. Central banks have adjusted their monetary policies. There is hope that we can avoid recession if governments take sound decisions for the economies.
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