If you look at the news coming out of Tesla over the last year or so, it’s obvious that the company is desperately trying to find ways to decrease operating costs. Whether it’s by closing down dealerships, publicly dismissing LIDAR because it’s too expensive, allegedly attempting to block worker’s comp cases, or laying off 9% of its workforce last June and a further 7% this January.
On Thursday Tesla CEO Elon Musk stepped up to a new level of money crunch when, according to Reuters, he told employees that every single page of any request for money needs to be signed off by either himself or company chief financial officer, Zack Kirkhorn, no matter how small. Musk confirmed this by confirming this crunch includes parts, salary, travel expenses, rent, and “literally every payment that leaves our bank account must be reviewed.”
In that same statement to employees, Musk stated that if the company’s Q1 losses of $US700 ($1,020) million were to extend through the year, the company would be out of money within 10 months. Despite recently closing a $US2.7 ($4) billion offering of stock and convertible notes, the company currently only has reserves of $US2.2 ($3) billion.
Musk on the cash crunch: “This is hardcore, but it is the only way for Tesla to become financially sustainable and succeed in our goal of helping make the world environmentally sustainable.”
A similar email was sent in April of last year where Musk stated he had told the Tesla financial team to “comb through every expense worldwide” to find line items that could save the company money. A year later, the company is chasing the same issues. It’s clear that Musk no longer trusts the financial team to make the right decisions with company money, and has adopted an “I alone can fix it” view of the situation.
Can Tesla produce, sell, and deliver cars at a rate that will make the company a sustainable profit? I think long term it’s possible. Can it be done in 10 months? I somehow doubt it.