Tesla will slash executive pay and furlough hourly workers during coronavirus shutdown
Tesla Inc. will temporarily cut employee salaries by as much as 30% starting Monday to save costs while the coronavirus pandemic forces the company to shut down some operations.
In the U.S., those ranked vice president or above will see the steepest salary reductions, followed by a 20% cut for directors, and 10% for everyone else, according to an internal memo seen by Bloomberg. Workers outside the U.S. will see similar reductions. For the exception of those being assigned to critical tasks, employees who can’t work from home will be furloughed without pay, though they’ll keep health-care benefits.
The move adds to the growing number of companies slashing labor costs to weather the pandemic. The outbreak hit just as Tesla was ramping up the production of its Model Y crossover, accelerating output at its new Shanghai plant and forging ahead with plans to build a new facility near Berlin.
“This is a shared sacrifice across the company that will allow us to progress during these challenging times,” Tesla said in the memo.
A Tesla representative declined to comment.
Tesla agreed to idle U.S. production last month amid orders to do so from authorities. The electric-vehicle maker expects to resume normal production at its U.S. facilities on May 4, according to the memo.
Even after re-opening its facilities, Tesla will probably need about two weeks to ramp up production again, analysts at Credit Suisse Group AG said in a note. Tesla had about 30,000 cars in inventory at the end of the first quarter, sufficient to meet weakened demand, the analysts wrote.
The company has about 56,000 employees, according to a recent company email. Its sole U.S. car production facility is in Fremont, California, where current stay-at-home orders extend until May 3.
Wage adjustments and equity grants will be put on hold, according to the memo. The pay cuts are expected to last until the end of the second quarter and those furloughed are likely to be asked to return on May 4, Tesla told employees.
At its Nevada gigafactory, Tesla is reducing on-site staff by 75%, according to the county where the plant is located. The facility produces battery packs and electric motors with partner Panasonic Corp.
Tesla’s Shanghai plant, meanwhile, recovered from a virus-related shutdown faster than many in the industry, helped by aid from local authorities. After resuming operations in February, the factory — Tesla’s only outside the U.S. — surpassed the capacity it had before the shutdown, reaching a weekly production of 3,000 cars, the company said last month. Tesla is also planning to expand its lineup in China by introducing a locally built Model 3 sedan with a longer driving range from as early as this week, people familiar with the matter have said.
Though down from a February peak, shares of Tesla are still up 30% this year.
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