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Tesla memo announces structural shake up, more focused strategy

Tesla memo announces structural shake up, more focused strategy

Elon Musk, the technocrat founder and CEO of innovative electric carmaker Tesla, sent a memo to employees on Monday. In it, Musk wrote that the company would “flatten” its structure, improve communication, and cut back on activities “that are not vital.” Some investors may not be shocked by this news – on a recent earnings call, Musk admitted that he was looking to make changes at Tesla in order to improve its financials – good news, when you consider the company’s rather impressive (and probably not sustainable) levels of expenditure.

Here’s what Musk said on the earnings call earlier this month: “We are going to conduct a sort of reorganization, restructuring of the company this month, and make sure we’re well set up to achieve that goal. And in particular, the number of sort of third-party contracting companies that we’re using has really gotten out of control, so we’re going to scrub the barnacles on that front. It’s pretty crazy. We’ve got barnacles on barnacles. So there’s going to be a lot of barnacle removal.”

Tesla revealed better than expected earnings at the beginning of this month. But analysts noted that it now holds $2.7 billion in cash, down from $3.4 billion at the end of 2017. Some amongst Wall Street’s finest believe this spending could cause problems for Musk. CRFA analyst Efraim Levy is on record as being one of them. He recently told CNBC that, at current levels of spending, he expects Tesla to burn through $4.5 billion over the next two years.

Privately, Musk might agree with him. In a leaked email that was circulated prior to earnings, Musk said he wanted to be more rigorous about expenditures, particularly in regards to the company’s relationship with suppliers and contractors. Balancing those statements against what Musk has said elsewhere – on the earnings call, in the latest memo – it is quite clear that he’s hoping to trim Tesla’s fat and make it a lean, mean, positive-performance-generating machine.

Here’s what Monday’s memo says in full:

“To ensure that Tesla is well prepared for the future, we have been undertaking a thorough reorganization of our company. As part of the reorg, we are flattening the management structure to improve communication, combining functions where sensible and trimming activities that are not vital to the success of our mission. To be clear, we will continue to hire rapidly in critical hourly and salaried positions to support the Model 3 production ramp and future product development.”