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Tesla tells hundreds of its employees they're not good enough to work there

Russ Mitchell, Los Angeles Times on

Published in Automotive News

SAN FRANCISCO -- Firing hundreds of workers all at once is rare, at least in the auto industry. But Tesla Inc. does things differently.

Word leaked out Friday that the electric car, battery and solar roof company had bulk-fired several hundred employees.

The Mercury News, which broke that story, said Tesla made clear that workers were dismissed for subpar performance, not laid off. Layoffs tend be blamed on business conditions or overstuffed payrolls, not on job performance.

It's unclear how many of the company's 33,000 workers were cut. Tesla won't pinpoint the number. News reports put it between 400 and 1200.

A factory employee told The Mercury News that about 60 fellow workers were told to head for the exits. The company said, however, that most of those dismissed work in administrative and sales jobs.

Some workers at the Tesla plant have been trying to organize a union.

Tesla Chief Executive Elon Musk is well known as a demanding boss with a hard-driving personality. Lately, while his rocket company SpaceX seems to be doing well, he has been plagued with serious problems at Tesla.

The new compact Model 3 sedan, crucial to Tesla's success, is off to a bad start. By the end of the year, the company has said, the company's auto factory in Fremont, Calif., is supposed to be turning out Model 3s at monthly rate of 20,000 vehicles. At last report, however, the company has built only 260 of them. The factory, Musk has said, is "deep in production hell."

At the same time, sales of the company's existing Model S and Model X luxury cars are growing slowly, and have yet to crack 100,000 vehicles a year.

Firing large numbers of workers for bad performance by itself is not unprecedented. In the 1980s, General Electric CEO Jack Welch fired what the company deemed to be the bottom 10 percent of the executive workforce every year.

But those firings were staggered, based on clear objective measures, and the company discussed the process in detail with investors and with the media.

Thus far, Tesla has not said much at all.

The company reports third-quarter earnings in late October or early November -- no specific date has been set. The firings won't affect earnings for that quarter, which ended Sept. 30.

Depending on how quickly Tesla replaces the fired workers and whether most of those jobs are filled, the firings could have a positive effect on fourth-quarter and full-year earnings, lifting profit -- or, more likely, easing losses -- by a bit.

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