Tesla may lay off 24% of staff

Bensinger is a Times staff writer.

Struggling to raise money amid the financial crisis, electric carmaker Telsa Motors Inc. will eliminate nearly a quarter of its workforce in a bid for profitability.

Chairman and Chief Executive Elon Musk said Friday that Tesla would cut as many as 87 staff and full-time contract workers, or 24% of the 363-person total. The company also will attempt to raise $25 million, rather than the $100 million it had been seeking.

Last week, the Santa Rosa-based start-up said it would delay production of its electric sedan, close two offices, increase production of its $109,000 Roadster and lay off an unspecified number of employees.

Over the last week, affected workers were notified, although the exact number of jobs to be lost is not certain because it remains unclear how many employees in its Rochester Hills, Mich., engineering office will accept offers to relocate to the Bay Area.


Although some reductions were related to the decision to delay the Model S sedan, Musk said many were based on job performance.

“There needs to be an excellence throughout the organization,” said Musk, the co-founder of PayPal Inc., who also heads SpaceX, a rocket company in Hawthorne. “Somebody who is a good employee at a typical organization wouldn’t cut it at Tesla.”

Musk said managers were instructed to rate their employees, and those that did not measure up to the highest standards -- what Musk called the “top 10% industrywide” -- would be replaced.

Musk added that Tesla would model its hiring process on the stringent approaches used by companies such as Google Inc. and Apple Inc. Musk said he would personally interview all finalists for jobs.

In recent years, Tesla has raised roughly $300 million, mostly in venture capital. But with capital markets hurting and investors hesitant to put their money in anything speculative, the carmaker was unable to reach its goal of raising $100 million more to fund the Model S project, forcing the company to alter its plans.

Last week, Musk replaced Ze’ev Drori as chief executive and delayed production of the Model S, to be built in San Jose, until 2011. He also said the company would increase production of the Roadster. About 50 have been delivered to date.

On Friday, Musk said production of its electric two-seater would be ramped up to 30 a week by the second quarter of next year. Musk said anything over 20 per week would be profitable.

“I’d guess we’ll probably make around 1,100 Roadsters next year,” Musk said.


The Roadster is assembled in England by Lotus and draws on a huge lithium-ion battery pack to allow it to travel up to 244 miles on a charge. Musk denied reports that the Roadster, in normal driving, was unable to crack the 200-mile range.