Elon Musk made it known plain and clear that the company will run out of cash in a matter of 10 Months if there isn’t any changes to how it spends. This message was conveyed to staffs of the company via an email and was obtained by Reuters and Electrek. Eventhough Tesla had just raised a whooping $2.7 Billion earlier this month.
Elon Musk made it known that he and the new CFO Zaxh Kirkhorn will review all expenses of all sorts anywhere in the word which would also include parts, salaries, travel expenses, rents almost everything that has to do with cash before it leaves the company’s bank account.
Tesla finished the first quarter of 2019 with $2.2 billion in cash but the company still lost $702 million which prompted Musk to admit the company was going to be on a Spartan Diet. But then the company successfully raised the largesum $2.7 billion to help keep the company at it’s stable state.
“This is hardcore, but it is the only way for Tesla to become financially sustainable.” Musk wrote. “This is a lot of money, but actually only gives us about 10 months at the Q1 burn rate to achieve breakeven!”
“This is hardcore, but it is the only way for Tesla to become financially sustainable and succeed in our goal of helping make the world environmentally sustainable.”
While this isn’t the first time Elon Musk would announce such financial overhaul at the company, it also won’t be the first time he would embrace on the micromanaging style to keep the company’s finances afloat.
In fact, the same thing happened just a year ago when he, Musk sent out an email to the company’s employees that he was having the finance team “comb through every expense worldwide, no matter how small, and cut everything that doesn’t have a strong value justification.” He said at the time that he was “disappointed to discover”
Elon Musk had taken decisions in the past to restructure the company and ensure the financial stability of the company. This even happened at the expense of laying off 9% of the company’s workforce when he made it known that “Making this hard decision now so that we never to do this again.” while he said he was going to check through all finances of the company.
Even one would guess the ambitious increase in the number of production made on the Tesla Model 3 to keep the number high up for pre-order helped made the company score high while making profits back to back in the previous years. This still doesn’t automatically turn the company into a profit making machine at least not in the first quarter of 2018 when it lost quite big making the company to lay off another round of 7% of it’s workforce in January.
Aside this, the company also announced in February it would be closing many of it’s stores which will lead to another lay-off of a number of sales staffs in order to save money. This was in order to allow the company to lessen the price of the base version of the Model 3 to $35,000. Musk admitted last May that the delay to lessen the price of the Model 3 was so as not to kill the company.
But afterwards, Tesla came back saying most of it’s stores won’t be shutting doors because the company had raised prices on its cars to compensate this. But the increase in the pricing of cars came at it’s cost according to letter sent to shareholders in the most recent quarter. The company made it known it known that changes to the Model S and X alone was $121 million of the total $702 million overall loss it had
So when the company would finally announce its back to back profits later on this January, the Model 3 was the reason for the success and this had made the company to double it’s production and it had paid off.
But even though with the Model 3 still appearing to be the savior of Tesla as predicted by Elon Musk, the severe loss it had in the first quarter of 2019 had caused a serious friction in the goals and realization of it.
But then Musk wants to keep Tesla afloat despite the company suddenly making profit during the second quarter as it had earlier surprised he himself. So the new financial measurement includes restricting the way the company spends every bits of it’s cash no matter how tiny it is.
As he had decided to always employ the “Micro or Nano-Management” style as a way of keeping the company in business so things don’t go south each time the company is having financial crisis.
“If you are fighting a battle, it’s way better if you are at the front lines. A general behind the lines is going to lose,” he told The Wall Street Journal in 2015.