Tesla’s two senior executives quit as carmaker undertakes largest-ever global round of job cuts

Senior Vice President Drew Baglino resigned from the company, he said on X Monday, confirming an earlier Bloomberg report. He’s been one of just four named executive officers at Tesla, leading engineering and technology development for its batteries, motors and energy products. 

The 18-year company veteran — who co-hosted earnings calls and shared the stage with Chief Executive Officer Elon Musk at multiple events, including Tesla’s investor day just over a year ago — is leaving along with Rohan Patel, the carmaker’s vice president of public policy and business development. Patel also confirmed his departure on social media, and Musk responded by thanking both executives.

The carmaker’s shares dropped more than 3% Monday. The stock has fallen 33% this year.

The shake-up coincides with Musk announcing the decision to cut headcount by potentially more than 14,000 people globally amid the deteriorating outlook for EV sales. In an email to staff, the CEO cited duplication of roles and the need to reduce costs.

“As we prepare the company for our next phase of growth, it is extremely important to look at every aspect of the company for cost reductions and increasing productivity,” Musk wrote in the memo, which was seen by Bloomberg News. “There is nothing I hate more, but it must be done.”

The departure of Baglino is likely to reinforce concerns among some investors about succession planning at Tesla, where Musk has been CEO since 2008. The billionaire leads six companies and doesn’t devote his full time or attention to the world’s most valuable automaker. Musk also said early this year that he preferred to build products elsewhere unless he’s awarded around 25% voting control.

The CEO lost another top deputy in August, when Zachary Kirkhorn stepped down as CFO after 13 years with Tesla.

Broader Struggles

It’s not clear whether the departure of the top Tesla executives was connected to broader struggles at the EV maker. Tesla reported vehicle deliveries early this month that missed expectations by a wide margin, posting its first quarterly decline in four years. 

Several analysts are bracing for the EV maker’s sales to potentially shrink for the year, citing slow output of its newest model — the Cybertruck — and a lull in new products until the company starts producing a next-generation vehicle late next year.

Tesla ended last year with 140,473 employees, almost double its total three years earlier. It’s been ramping up output at two plants — one in Austin, and the other outside Berlin — that started cranking out Model Y sport utility vehicles in early 2022. The company started slashing prices across its lineup as those facilities reached higher volumes.

“Over the years, we have grown rapidly with multiple factories scaling around the globe,” Musk wrote in the email, which was reported earlier Monday by the blog Electrek. “With this rapid growth there has been duplication of roles and job functions in certain areas.”

Tense Meeting

Musk’s biographer, Walter Isaacson, described Baglino as a personable engineer with an easy laugh. In his book on Musk published last year, Isaacson recounted a tense first meeting Baglino had with the CEO over how many battery cells Tesla would need to hit its range target.

“I never want to be in another meeting with Elon,” Isaacson quoted Baglino saying to Tesla co-founder J.B. Straubel, who left the company in 2019 but joined its board of directors last year.

Isaacson writes that Straubel reassured Baglino, who’s quoted saying that Musk’s battery-cell calculation proved correct.

Baglino has netted about $96 million from periodic share sales since he was appointed a senior VP and had to start publicly disclosing his transactions, according to Bloomberg calculations. The sales have been executed under multiple pre-arranged trading plans, filings show.

Baglino and Tesla’s board chair, Robyn Denholm, set up share-trading plans late last year allowing them to sell significant sums of stock. Baglino made arrangements to potentially sell up to 115,500 shares through the end of this year, according to a regulatory filing.

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Published: 15 Apr 2024, 10:22 PM IST