Tesla Lays Off 3,000 Employees As It Prepares to Tackle $920-Million Debt
Tesla is without a doubt one of the most successful automakers in the world today, because of its initiative in making vehicles fully electric or hybrid. It is literally one of the most in-demand cars not just in the United States, but in the entire world.
However, it seems that the ball has not been in Tesla’s court for these past couple of months. Despite all of it’s prior achievements , the company revealed that it is buried under a debt of $920 million that is due this March, which is just around the corner. The company has suddenly gone in panic mode and is making desperate attempts at cutting costs. And they’re starting with a mass clearing in the company, resulting in over 3,000 job losses.
$920 Million Debt
Back in September last year, Tesla made a surprising revelation regarding a certain $920 million debt that is due in March 2019. They decided to notify their shareholders and investors regarding the matter that may actually affect their sales and stock. The original plan was to use not just equity, but also cash to pay off the debt.
What the company failed to do was warn their employees about the possibility of layoffs, which they just revealed last week. It was reported that the $920 million debt was due the first week of March and is in convertible senior notes with a conversion price of $359.87 per share.
Experts say that the main concern now is how Tesla hasn’t even traded more than $359 for a few weeks now. If they manage to push it over the $359.87 mark by the payment date, Tesla could potentially pay off the debt with its shares. If they fail to reach the exact amount, they don’t really have a choice but to face the consequences.
Wall Street analyst Adam Jones from Morgan Stanley stated that the situation Tesla is in at the moment is a massive sign that the electric-car company is so close to the peak. He predicts that this year will be a test to see how their shares will get shaken up with all the competition slowly rising especially within the European Union.
Tesla will soon release the much-anticipated Model 3, however, it is not the only car that people are excited about because Cadillac will also introduce its first electric concept vehicle this year and Nissan will follow suit with a fully autonomous all-wheel drive vehicle. Tesla will surely struggle in the face of tough competition this year and it is something they should have been prepared for.
It may seem such a great opportunity to be working at one of the fastest growing auto manufactures in the world, however, it is not so great when you find out that you could be fired because of the upcoming multi-million dollar debt that the company has accrued over the past. It was announced last weekend that the electric car company will be laying off over 3,000 out of 45,000 of their employees.
Founder and chief executive officer Elon Musk made a statement that reveals the real reason behind the tough decision. The CEO said that Tesla Model 3’s base model will be sold for only $35,000, which leaves the company with very little profit to cover its costs.
He explained that the move is basically to cut down on labor costs in order to keep their heads above the water. Things got complicated because of the recent issue with the US federal tax credit that was available to customers who could reportedly avail a steep discount of $7,000 when buying a brand new Tesla.
Musk indicated that it was truly an unfortunate event but the company was left with no choice but to reduce its workforce. The electric-company CEO didn’t specify, however, which of their workers will have to bear the brunt of this current situation. Despite the current crisis, Musk expressed his gratitude towards those who will have to depart from the company for their contribution towards the company’s success.
From the 16 years that the company has been in existence, last year was considered to be the most challenging for Tesla according to Musk. He explained how their mission of basically helping the environment by sustainable transport and energy, is really tough, especially because of how expensive it can be to create these vehicles. The company will have to release their 4th quarter reports this coming February, just a month before their debt is due.
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