Tesla Motors

Tesla to cut employee salaries due to coronavirus

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Decision to Furlough non-essential Workers

With the increasing severity of the coronavirus pandemic, Tesla Inc. has recently told employees that it would furlough all the non-essential workers and also implement salary-cut during the shutdown of its U.S. production facilities because of the coronavirus outbreak. The company, which suspended production at its San Francisco Bay Area vehicle and New York roof tile factories on March 24, said that the decisions were part of a broader effort to manage costs and achieve long-term plans. Tesla said it has planned to resume normal operations by May 4, barring any significant changes.

Reduced Demand for Cars in the U.S.

The coronavirus pandemic has impacted the U.S. automotive market big time as it has slashed U.S. demand for cars. It has also enforced several other automakers in the U.S. to furlough workers. From April 13, the pay for salaried Tesla employees will be reduced. The cuts will remain in place until the end of the second quarter. It said that employees who cannot work from home and have not been assigned to critical work onsite factories will be furloughed, with workers maintaining their healthcare benefits until the production resumes.

Interruption in Model Y SUV Production

Tesla’s sole U.S. auto factory employs more than 10,000 workers, with annualized production of slightly more than 415,000 units by the end of December 2019. This suspension is expected to interrupt a planned ramp-up in production of Tesla’s Model Y Sports Utility Vehicle at the factory. The demand for Model Y is expected to be higher than for all of Tesla’s other models combined. “The Model Y taps into the strong demand for SUVs and is much less expensive than the high-end Model X,” Chief Executive Elon Musk said in the past. Tesla recently said it believed it had enough liquidity to successfully navigate the extended period of uncertainty, with some $6.3 billion cash at the end of the third quarter, ahead of a recent $2.3 billion capital raise.



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