In March, Tesla chief executive Elon Musk downplayed the coronavirus threat and tweeted that the panic over the virus is “dumb.” A month later, the electric vehicle company is scrambling to manage the impact of the pandemic.
Tesla is now forced to place many of its 50,000-strong labor force on unpaid leave. To add insult to injury, Tesla employees will see their salaries slashed by as much as 30%.
I bet the affected employees don’t think that the panic over the coronavirus is dumb.
On March 19, the EV maker reiterated that it has a strong cash position to absorb the impact of uncertainty:
Our cash position at the end of Q4 2019 was $6.3B before our recent $2.3B capital raise. We believe this level of liquidity is sufficient to successfully navigate an extended period of uncertainty.
Not even a month later, Tesla is forced to implement a number of cost-cutting measures due to the impact of coronavirus on the economy.
First, the company announced that employees who are working from home or have received critical tasks will take a 10%-30% temporary salary reduction depending on their pay grade. The head of the company’s HR wrote:
For US employees, these reductions are 30% for Vice Presidents and above, 20% for Directors and above, and 10% for everyone else.
Non-U.S. workers will also see similar pay cuts.
Meanwhile, non-essential employees who cannot work from home will be placed on furlough until May 4.
While employees bear the brunt of Tesla’s new policies, Elon Musk’s $2.6 billion compensation is unaffected.
Tesla’s stock (TSLA) was the hottest equity in the world at the start of 2020 as it surged from $421.71 in the span of a month. That’s a gain of nearly 130%.
Since then the EV maker’s stock has been in free-fall. It dropped to as low as $350.51 on March 18. While TSLA is now showing signs of life, it’s likely to continue lower in the near term.
The Fremont factory was shut down a couple of weeks ago and the local government has warned that the lockdown in the Bay Area could be extended. Without a clear date on when production can resume, Tesla’s supply chain will most likely be affected. With no bullish catalyst in sight, it would be tough for TSLA to carve a bottom.
I don’t think Elon Musk still thinks that the coronavirus panic is dumb.
The opinions expressed in this article do not necessarily reflect the views of CCN.com. The above should not be considered trading advice from CCN.com.