Elon Musk now tells execs Tesla needs to ‘pause all hiring worldwide’ and cut staff by 10%

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Elon Musk has told top executives they need to slash Tesla jobs by 10 per cent and pause hiring worldwide because he has a ‘super bad feeling’ about the economy.

The billionaire sent an internal email warning of the need for cuts amid a gloomy economic outlook due to inflation and the brutal war in Ukraine.

But he did not elaborate on why he was worried in the brief message and did not comment on whether it would affect his $44billion Twitter takeover.

Tesla stocks were immediately down in pre-market trading following the comments, which were leaked to Reuters on Thursday night.

The electric car company’s share price plummeted 3.3 percent early Friday, while Dow Jones sunk 0.5 percent, S&P 500 slid 0.7 percent and Nasdaq fell 1.2 percent.

Musk has warned in recent weeks about the risks of recession, but ordering a hiring freeze and staff cuts was the most direct and high-profile message of its kind.

Remotely addressing a conference in mid-May in Miami Beach, he said: ‘I think we are probably in a recession and that recession will get worse.’

Almost 100,000 people were employed at Tesla and its subsidiaries at the end of 2021, its annual SEC filing showed.

Earlier this week he demanded his employees return to the office or leave the company in another direct email. ‘Everyone at Tesla is required to spend a minimum of 40 hours in the office per week,’ Musk wrote Tuesday night.

‘The office must be where your actual colleagues are located, not some remote pseudo office. If you don’t show up, we will assume you have resigned.’

Another earlier email to senior employees also said: ‘The more senior you are, the more visible must be your presence.

‘That is why I lived in the factory so much – so that those on the line could see me working alongside them. If I had not done that, Tesla would long ago have gone bankrupt.’

The South-African mogul then seemed to take a shot at Silicon Valley firms that have implemented increasingly remote work polices in the years after the pandemic.

‘There are of course companies that don’t require this,’ the CEO wrote – adding, ‘But when was the last time they shipped a great new product? It’s been a while.’

‘Tesla has and will create and actually manufacture the most exciting and meaningful products of any company on Earth,’ Musk continued.

‘This will not happen by phoning it in,’ the head exec wrote, before signing off with, ‘Thanks, Elon.’ Experts agreed with Musk the global economy was in freefall and his ‘bad feeling’ was shared by many.

Carsten Brzeski, global head of macroeconomic research at ING, said: ‘Musk’s bad feeling is shared by many people.

‘We’re talking about stagnation and a global economy which has to go through significant structural change, such as decarbonisation, deglobalisation 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 US will cool off, while China and Europe are not going to rebound. 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.’

Jamie Dimon, Chairman and Chief Executive of JPMorgan Chase, described the challenges facing the US economy as akin to a ‘hurricane’.

However, although financial experts acknowledged a ‘bad feeling’, many were unsure a global recession is on the cards.

Fiona Cincotta, a financial markets analyst at City Index in London, said: ‘Although the Fed thinks a soft landing is possible… there are some warning signs in the economy.

‘We know that growth is slowing and inflation remains persistently high and we know that the Fed will need to act aggressively to bring inflation back down.

‘The question is – will they be able to act as aggressively as they need to, and obviously Elon Musk doesn’t think that they’re going to be able to, without putting the economy into a deep recession. China slowdown is an added problem.’

The former Italian treasury chief economist, Lorenzo Codogno, said it was ‘clear rising prices will weaken consumption’.

He said: ‘If the inflation flare-up starts fading at the beginning of next year we will probably not see as dramatic an impact on the global economy as Musk seems to indicate.

‘If the shock is temporary, companies will probably have an interest in not losing human capital.’ Francois Savary, chief investment officer at Prime Partners, hit out at Musk’s comments.

He said: ‘At the end of the day it’s easy to make such comments. Everyone has fears but there is no sign yet to justify such a negative outlook.

‘There is a risk of recession but you need to see numbers heading in that direction and so far there are none.

‘It will depend a lot on what happens in the labour market. If we have a significant deterioration of US labor markets over the summer, then there is a risk of recession next year.’

Daniel Ives, managing director and senior tech analyst at Wedbush Securities tweeted: ‘Elephant in the room now remains the radio silence on Twitter deal. Musk more negative on economy, what’s next in Twitter saga.’

Several analysts have cut price targets for Tesla recently, forecasting lost output at its Shanghai plant, a hub supplying EVs to China and for export.

China accounted for just over a third of Tesla’s global deliveries in 2021, according to company disclosures and data released on sales there.

On Thursday, Daiwa Capital Markets estimated Tesla had about 32,000 orders awaiting delivery in China, compared to 600,000 vehicles for BYD (002594.SZ), its larger EV rival in that market.

Wedbush Securities analyst Ives added it appeared Musk and Tesla were ‘trying to be ahead of a slower delivery ramp this year and preserve margins ahead of an economic slowdown.’

Before Musk’s warning, Tesla had about 5,000 job postings on LinkedIn from sales in Tokyo and engineers at its new Berlin gigafactory to deep learning scientists in Palo Alto.

It had scheduled an online hiring event for Shanghai on June 9 on its WeChat channel. Musk’s demand that staff return to the office has already faced pushback in Germany.

And his plan to cut jobs would face resistance in the Netherlands, where Tesla has its European headquarters, a union leader said.

‘You can’t just fire Dutch workers,’ said FNV union spokesperson Hans Walthie, adding Tesla would have to negotiate with a labor union on terms for any departures.

Other companies have cut jobs or are slowing or pausing hiring amid weakening demand. Last month, Netflix said it had laid off about 150 people, mostly in the US, and Peloton said in February it would cut 2,800 jobs.

Meta, Uber and other technology companies have slowed hiring. In June 2018, Musk said Tesla would cut 9 per cent of its workforce as the then-loss-making company struggled to ramp up output of Model 3 electric sedans.

Meanwhile the world’s richest man is still embroiled in a months-long deal to buy Silicon Valley social media giant Twitter for roughly $44billion.

His stark anti-remote sentiments are expected to fly in the face of the company’s more relaxed work from home rules – which allow employees to work remotely forever.

In April, after the deal was announced, Musk seemed to take a shot at this policy, asking his followers if he should transform the company’s Bay Area headquarters into a homeless shelter because ‘no one shows up anyway.’

Twitter’s top brass – who offered staffers the option of working from home ‘forever’ during the pandemic – reopened its offices March 15, with remote work remaining an option for staffers.

‘It’s been almost two years since we closed our offices and travel and I’m excited to announce that we’re ready to fully open up business travel and all our offices around the world!’ Twitter CEO Parag Agrawal wrote in a note to employees posted to Twitter March 3.

‘Business travel is back effective immediately, and office openings will start on March 15,’ the exec wrote.

In the statement, Agrawal, who was promoted to CEO from CTO in November, said that he would be honoring a policy put in place by former head exec Jack Dorsey during the early days of the pandemic, that said staffers could work remotely ‘forever’ if they wanted to.

‘Our top priority since the beginning of the pandemic has been to keep you all safe and this will continue,’ Agrawal wrote.

‘Now we are returning to a stage where you’re living your lives, adjusting to local health guidelines, and deciding what works best for you.

‘So, the decisions about where you work, whether you feel safe travelling for business, and what events you attend, should be yours,’ the exec added, in a sentence this time set in bold.

‘As we open back up, our approach remains the same,’ Agrawal, 37, went on. ‘Wherever you feel most productive and creative is where you will work and that include working from home full-time forever,’ the CEO wrote, in another bolded sentence.

‘Office every day? That works too. Some days in the office, some days from home? Of course.’

More than a month later, as Silicon Valley’s tech workers are starting to filter back to the office as Covid-19 cases plummet, it looks as if the CEO’s faith in staffers’ desire to return to work in-person was misplaced – something new board member Musk seemed to hone in on with his evidently mocking post.

Twitter has not issued any in-person requirements for its staffers. The deal is expected to close later this year. Tesla was not immediately available for comment.