BUFFALO, N.Y. — Tesla is planning to cut more than 4,000 jobs across the company's footprint. It's unwelcome news for employees who were notified of the reorganization Tuesday, but perhaps good news for stockholders, at least based off the market's reaction.
"It reacted positively to the news yesterday as most stocks do because you're buying companies. You should be buying companies for earnings. You're an owner of a company and when you own a company you want them to make money," Michael Lomas, The Financial Guys co-president, said.
The tech and auto company has not been historically profitable, instead using an oft-criticized model which relies in part on government subsidies. Lomas said the layoffs could be the first step toward a change.
"What it's saying to shareholders in Wall Street is, ‘hey we are actually worried about making money and even though we're not saying we're worried about money, we are worried about money,’" he said.
The layoffs target management and do not appear to affect Tesla's new solar panel factory in South Buffalo for which New York State has invested about $750 million.
"We immediately got in contact with Tesla and the representatives there. We have been reassured that in the state of New York the cutbacks are minimal and in Buffalo and Western New York there are none," state Sen. Tim Kennedy, D-Buffalo, said.
Kennedy, who represents the district where the factory is located, said between Tesla and partner Panasonic, there are more than 600 employees in the facility and he expects the number to exceed 700 by the end of the summer.
"I think we are also seeing that with the messaging coming out of Tesla that there's great consumer confidence in the product as the stocks have risen in the last couple months by about 40 percent," he said.
Lomas, however, pointed out the company's stock is down over the last year and is underperforming the S&P 500 index. He said Tesla needs to start hitting its production targets if it wants to maintain stockholder confidence.
"I just don't see a turnaround there unless they come up with something that's affordable for people where we don't need government subsidies to make it work and they don't seem to have any attention of doing that,” Lomas said.