Over the past few weeks, Tesla CEO Elon Musk has been warning of a focus on efficiency at Tesla’s Fremont factory and he has been expressing a specific concern over contractors and sub-contractors working at the automaker.
After announcing a review of all contractors, Tesla has now engaged in a brutal round of firing that could see all contractors who are not personally vouched for by an official Tesla employee go.
In the email, Musk wrote:
“I have been disappointed to discover how many contractor companies are interwoven throughout Tesla. Often, it is like a Russian nesting doll of contractor, subcontractor, sub-subcontractor, etc. before you finally find someone doing actual work. This means a lot of middle-managers adding cost but not doing anything obviously useful. Also, many contracts are essentially open time & materials, not fixed price and duration, which creates an incentive to turn molehills into mountains, as they never want to end the money train.
There is a very wide range of contractor performance, from excellent to worse than a drunken sloth. All contracting companies should consider the coming week to be a final opportunity to demonstrate excellence. Any that fail to meet the Tesla standard of excellence will have their contracts ended on Monday.”
Musk has apparently extended the deadline for the contractor to prove their “excellence”, but he also started to use stronger language about the situation.
During Tesla’s Q1 2018 conference call last week, Musk added on the situation:
“The number 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.”
He wasn’t kidding since he has now sent an email to employees in which he states that every contractor at Tesla who doesn’t have an employee “putting their reputation on the line for them will be denied access to our facilities and networks on Monday morning.”
Here’s what he wrote:
Please note my comment below about contractor companies and consultants. I extended the performance evaluation deadline to provide more opportunity to demonstrate excellence, but now time is up.Please send a note to HR before Monday justifying the excellence, necessity and trustworthiness by individual (not just the contractor company as a whole) of every non-Tesla person who has badge access to our buildings or network access to our systems.By default, anyone who does not have a Tesla employee putting their reputation on the line for them will be denied access to our facilities and networks on Monday morning. This applies worldwide.Time to scrub off the barnacles.Thanks, Elon
It’s not clear how many workers this will affect, but Tesla employs over 10,000 workers at its Fremont factory alone and the automaker has been known to employ hundreds of contractors at times.
Musk also announced last month that Tesla would be hiring around 400 new workers per week in Fremont for several weeks as the company needs more labor to ramp up Model 3 production after making some mistakes with their automation effort.
But this round of contractor review applies to all contractors worldwide and therefore, it is not only about Model 3 production in Fremont.
It wouldn’t be the first time that Tesla fired employees in mass after reviews. Last October, Tesla let go hundreds of employees after ‘performance reviews’ and it led to some union protests in Fremont.
We asked Tesla for a comment on the situation and we will update if we get an answer.
That’s quite a brutal way to make a review of your contractors, especially with the way it is phrased. We are not only talking about needing an official Tesla employee to make a recommendation to HR but to “put their reputation on the line for them.”
Many employees could be reticent to do it since if something happens down the line, it might end up coming back to them. But it could also prove to be a very efficient way to cut down on cost and keep only the most liked contractors at Tesla.
Musk has been pushing for Tesla to become profitable during the second half of the year and that’s completely dependent on the automaker optimizing Model 3 production and reducing labor hour per car. It could end up a step in the right direction or too brutal a firing round that creates even more issues. Only time will tell.
Tesla is a transportation and energy company. It sells vehicles under its ‘Tesla Motors’ division and stationary battery pack for home, commercial and utility-scale projects under its ‘Tesla Energy’ division.