Electric vehicle maker Tesla Inc. will cut thousands of jobs in the company as it attempts to lower costs and become profitable while not endangering its important production increase for its latest Model 3 sedan.
On Tuesday, CEO Elon Musk via an email sent to his staff said that the job cuts had been part of a simplification of the management structure of Tesla that was promised a month ago.
The email continued by saying as part of that effort, and a need to lower costs and be profitable, the difficult decision was made to let go 9% of the staff across several parts of the company.
The cuts, continued the email, were made almost entirely from salaried staff and no associates in production were included in order to not affect the ability of the company to reach production targets for the Model 3 over the upcoming months.
Tesla has attempted to hit a per week rate of production of 5,000 for the Model 3 sedan, after it faced problems initially in production. Last week, the CEO said Tesla should reach its monthly production target near the end of June.
Shares increased by up to 7% following the news of the job cuts and at the close were up 3.6%.
After these layoffs there likely will not be additional job cuts over the short-term said one analyst, adding that the carmaker would likely increase capital in early 2019.
Tesla has burned through large sums of cash as it continues spending on assembly line production and prepares for its new investments in such projects as its Gigafactroy and is Model Y crossover.
Free cash flow, which is an important metric showing financial health, widened during the first three months of 2018 to a negative $1 billion from negative $278 million during the 2017 fourth quarter.
Several analysts on Wall Street anticipate a new injection in capital during 2018 despite statements by Musk that, that would not be necessary because of profitability and cash flow changing to positive during the final two quarters of the year.
Tesla has said that it started notifying workers who were impacted by the jobs cuts on Tuesday. A spokesperson for the firm said the company would lower its overall employment to approximately 37,000 which is in line with 2017 year end numbers.
Musk added that Tesla had not renewed its residential sales contract with Home Depot, and would be focusing on selling solar products through its own website and stores.