Elon Musk has 'super bad feeling' about the economy; Tesla to cut staff by 10%

Frankfurt, June 3

Tesla Chief Executive Elon Musk told top managers he had a “super bad feeling” about the economy and that the electric carmaker needed to cut staff by about 10%, according to an internal email seen by Reuters.

The email, titled “pause all hiring worldwide”, was sent to Tesla executives on Thursday, underscoring an increasingly gloomy global economic outlook with prices soaring and war in Ukraine passing its 100th day.

The message from Musk came shortly after Jamie Dimon, chairman and chief executive of JPMorgan Chase, said the US economy faced challenges akin to a “hurricane”.

Here is reaction to the comments:

FRANK SCHWOPE, AUTOMOTIVE ANALYST WITH NORDLB: “I see the statements as a forewarning … in case the economy takes a turn for the worse.”

“All car manufacturers are facing many problems at the moment: supply chain issues due to (coronavirus) and the Ukraine war, closures in China, supply shortages and so on.” “Since many plants have not been working at full capacity since the (coronavirus) pandemic began, planned cost-cutting measures by the car companies are quite understandable.”

FIONA CINCOTTA, SENIOR FINANCIAL MARKETS ANALYST, CITY INDEX, LONDON

“Although the Fed thinks a soft landing is possible …

there are some warning signs in the economy. We know that growth is slowing and inflation remains persistently high and we know that the Fed will need to act aggressively to bring inflation back down.”

“The question is – will they be able to act as aggressively as they need to, and obviously Elon Musk doesn’t think that they’re going to be able to, without putting the economy into a deep recession. China slowdown is an added problem.”

LORENZO CODOGNO, HEAD OF LC MACRO ADVISERS AND FORMER CHIEF ECONOMIST AT THE ITALIAN TREASURY

“It is clear that rising prices will weaken consumption.

That is something we’ll need to face.”

“If the inflation flare-up … starts fading at the beginning of next year … we will probably not see as dramatic an impact on the global economy as Musk seems to indicate.” “And if the shock is temporary, companies will probably have an interest in … not losing human capital.”

DANIEL IVES, MANAGING DIRECTOR AND SENIOR TECH ANALYST, WEDBUSH SECURITIES

“Street will clearly read this message negatively at first blush,” Ives wrote on Twitter.

“Elephant in the room now remains the radio silence on Twitter deal. Musk more negative on economy, what’s next in Twitter saga.”

CARSTEN BRZESKI, GLOBAL HEAD OF MACROECONOMIC RESEARCH, ING

“Musk’s bad feeling is shared by many people.” “We’re talking about stagnation and a global economy which has to go through significant structural change, such as decarbonisation, deglobalisation and adjusting to older societies.”

“But we are not talking about global recession. We expect a cooling of the global economy towards the end of the year. The U.S. will cool off, while China and Europe are not going to rebound.”

“Laying off workers, however, is not the best reaction. We will need skilled workers more than ever in the future. This could turn into firing and then hiring,” he said.

FRANCOIS SAVARY, CHIEF INVESTMENT OFFICER, PRIME PARTNERS

“At the end of the day it’s easy to make such comments.

Everyone has fears but there is no sign yet to justify such a negative outlook.”

“There is a risk of recession yes … but … you need to see numbers heading in that direction and so far there are none.”

“It will depend a lot on what happens in the labour market.

If we have a significant deterioration of U.S. labour markets over the summer, then … there is a risk of recession next year.”