Tesla CEO Elon Musk said he had a “super bad feeling” about the economy and that the electric carmakers needed to cut staff by around 10%, he said in an email to executives on Thursday.
The email, seen by Reuters, underscored an increasingly gloomy economic outlook for the globe, as prices soar and the war in Ukraine passed its 100th day.
Musk’s stark warning of a potential recession and the knock-on effect for automakers is the most direct and high-profile forecast of its kind in the industry.
While concerns about the risk of a recession have grown, demand for Tesla cars and other electric vehicles has remained strong and many of the traditional indicators of a downturn – including increasing dealer inventories in the United States – have not materialized.
But Tesla has struggled to restart production at its Shanghai factory after COVID-19 lockdowns forced costly outages at the plant.
Musk’s gloomy outlook echoes recent comments from executives including JPMorgan Chase & Co CEO Jamie Dimon and Goldman Sachs President John Waldron.
A “hurricane is right out there down the road coming our way,” Dimon said this week.
Inflation in the United States is hovering at 40-year highs and has caused a jump in the cost of living for Americans, while the Federal Reserve (Fed) faces the difficult task of dampening demand enough to curb inflation while not causing a recession.
The message came two days after the world’s richest man told employees to return to the workplace or leave the company.
Tesla employed around 100,000 people in the company and its subsidiaries at the end of 2021, according to its annual SEC filing.
Before Musk’s warning, which came in an email titled “pause all hiring worldwide,” Tesla had about 5,000 job postings on LinkedIn from sales in Tokyo and engineers in its new Berlin gigafactory to deep learning scientists in Palo Alto.
Musk’s demand that staff return to the office has already faced pushback in Germany.
“Everyone at Tesla is required to spend a minimum of 40 hours in the office per week,” Musk wrote in his Tuesday email. “If you don’t show up, we will assume you have resigned.”
Musk also engaged on Thursday in a Twitter spat with Australia tech billionaire and Atlassian Plc co-founder Scott Farquhar, who ridiculed the directive in a series of tweets as being “like something out of the 1950s.”
Musk tweeted: “recessions serve a vital economic cleansing function” in response to a tweet by Farquhar who encouraged Tesla employees to look into its remote work positions.
In late May, when asked by a Twitter user whether the economy was approaching a recession, Musk said, “Yes, but this is actually a good thing. It has been raining money on fools for too long. Some bankruptcies need to happen.”
Jason Stomel, founder of tech talent agency Cadre, said: “I think there’s potential that this is just a disguised layoff, meaning they’re able to get rid of people with attrition, or without having to actually have a layoff.”
“(Musk) knows there’s a percentage of workers who are just not going to come back,” which he said would be cheaper because no severance would be needed.
“Musk’s bad feeling is shared by many people,” said Carsten Brzeski, global head of macroeconomic research at Dutch bank ING.
“We’re talking about stagnation and a global economy which has to go through significant structural change, such as decarbonization, deglobalization and adjusting to older societies.”
“But we are not talking about global recession. We expect a cooling of the global economy towards the end of the year. The U.S. will cool off, while China and Europe are not going to rebound,” Brzeski said.
“Laying off workers, however, is not the best reaction. We will need skilled workers more than ever in the future. This could turn into firing and then hiring.”
