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Tesla Announces Worker Furloughs and Pay Cuts

By Howard Smith – Apr 8, 2020 at 10:03AM

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The electric car maker's California factory has been idled due to the COVID-19 pandemic.

Tesla (TSLA -4.59%) has announced new salaried employee pay reductions, as well as hourly worker furloughs at its Fremont, California, manufacturing facility, according to a leaked company email, as reported by CNBC. The company's main electric car plant has been shut down, other than minimal critical operations, since March 24, 2020, due to shelter-in-place orders and other official direction to stem the spread of the COVID-19 pandemic. 

Earlier this month, the automaker reported first quarter vehicle delivery and production results that exceeded expectations. Tesla reported deliveries of approximately 88,400 vehicles versus 79,900 expected according to a Factset survey. It also said it produced about 103,000 vehicles, and it did not adjust its previously announced guidance for 2020 deliveries. 

automobile assembly line

Image source: Getty Images.

In its email to employees obtained by CNBC, Tesla explained its current plans for the U.S. facilities, saying its plan is to reopen May 4, 2020. The communication detailed pay reductions for salaried employees, which included a 30% cut for Vice Presidents and above, 20% for Directors, and 10% for the remainder of the salaried workforce. It noted that similar pay cuts would be put in place for non-U.S. salaried employees, and that these pay adjustments would be in place through the second quarter. 

Hourly workers who are not assigned to critical operations that continue to be staffed, or who cannot work from home, will be furloughed, and able to apply for unemployment benefits, according to the letter. 

The company also said employees who wished to take a voluntary leave of absence, or for those remaining on site, who did not feel comfortable reporting to work would be accommodated. 

Howard Smith has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Tesla. The Motley Fool has a disclosure policy.

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