Friday June 03, 2022

Musk fears recession, wants to lay off 10% workforce

Musk fears recession, wants to lay off 10% workforce

Elon Musk

Electric carmaker Tesla CEO Elon Musk’s internal mail on Thursday to the company executives expressing his “super bad feeling” that the economy may go into a recession and the need to freeze hiring and even cut 10 per cent of the staff seems to reinforce the hallmark of the brash billionaire. As his hopes are in excess, so, it seems are his fears and anxieties. It is indeed the case that neither the American nor the global economy are in great shape.

The war in Ukraine has made things harder. But not everyone is convinced that the economy is entering a recession. But the issue is not whether what Musk fears is true or not. That Musk believes in something and that he speaks about it and acts on it is the issue. If he were to stop hiring and laying off people, he might be indirectly triggering a recession without intending to do so. Tesla shares fell 3 per cent in pre-market trade after the Reuters report disclosed the contents of the mail, and the company’s shares by 3.6 per cent in the Frankfurt market.

It is not the first time that Musk had expressed his apprehensions about the state of the economy. In May, he told a Miami Beach conference, “I think we are probably in a recession and that recession will get worse. It’ll probably be some tough going for, I don’t know, a year, maybe 12 to 18 months is, usually, the amount of time it takes for a correction to happen.”

Musk is also facing problems on the Tesla front. The Shanghai lockdown due to COVID-19 has affected the production schedule of his plant and that is troubling him. He wanted to set up a plant in Bangalore, India. But he had dropped the idea. He tweeted on May 27: “Tesla will not put up a manufacturing plant in any location where we are not allowed to first to sell and service cars.”

But like all self-made rich individuals, Musk is his own man with his own whims and fancies. He has also shown that he does not really believe in doing things in a formal way. He said that he was offloading his shares in Tesla on Twitter, and the Tesla shares went into a spin. He increased his share in Twitter and became its largest shareholder and announced his intention to buy the microblogging platform. This too was announced on Twitter. The agreed sale price came to around $46 billion, and then suddenly Musk steps back on the issue of fake accounts. The drama is played out in the open and on the social platform stage. It might not be the case that he is not doing it to establish his brand image as that of a maverick.

He seems to be an impulsive man, imaginative, bold, and sometimes loud. He also adopted a tough position on the staff reporting at the workplace, 40 hours a week, to be on the rolls. On Tuesday, he sent out an email making clear his position: “Everyone at Tesla is required to spend a minimum of 40 hours in the office per week. If you don’t show up, we will assume you have resigned.” The tough tone of the message is what the man is. Without it, he would not have reached where he has reached.

It is interesting to note that Musk’s wealth grew almost exponentially in the two years of the COVID-19 epidemic. At the beginning of 2020, his wealth stood at $26.6 billion. In 2020, it grew by $110 billion, and in 2021 by another $90 billion. And his wealth now stands at $282 billion. It is indeed ironical that when the global economy was hit by the pandemic and then by the war in Ukraine, he gained the most.

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