Here's the memo Elon Musk just sent announcing a major shake-up at Tesla

  • Tesla plans to streamline its management structure as part of its reorganization efforts.
  • CEO Elon Musk has said there would be some changes.

Tesla CEO Elon Musk told employees Monday that the company plans to "flatten" its structure as it works to improve communication and trim activities "that are not vital" to its success.

"To ensure that Tesla is well prepared for the future, we have been undertaking a thorough reorganization of our company," Musk said in a copy of the memo obtained by CNBC.

Tesla will "continue to hire rapidly in critical hourly and salaried positions to support the Model 3 production ramp and future product development," he added.

When contacted by CNBC, Tesla declined to comment.

Tesla shares were down nearly 1.6 percent in afternoon trading Monday.

On a recent conference call, Musk warned the electric car maker would make some changes to improve its financial health. Tesla has been burning through billions in cash, and some analysts think the company will need to raise capital again by early 2019.

"We are going to conduct a sort of reorganization, restructuring of the company this month, and make sure we're well set up to achieve that goal," said Musk during the call in early May, after the company reported first-quarter earnings.

"And in particular," he said, "the number of sort of third-party contracting companies that we're using has really gotten out of control, so we're going to scrub the barnacles on that front. It's pretty crazy. We've got barnacles on barnacles. So there's going to be a lot of barnacle removal."

Credit rating agency Moody's downgraded Tesla credit in late March and changed its outlook to negative from stable.

Tesla ended its first quarter with $2.7 billion in cash, down from $3.4 billion at the end of 2017. CFRA analyst Efraim Levy told CNBC he expects outflows of about $4.5 billion over the next two years, including both the money Tesla needs to spend on its business and what it needs to pay debt

That was not the first time Musk said he wanted to trim Tesla's fat. Before earnings, a leaked email revealed the company will be more rigorous about expenditures, including its relationship with suppliers and contractors.

Here is the full Monday memo:

"To ensure that Tesla is well prepared for the future, we have been undertaking a thorough reorganization of our company. As part of the reorg, we are flattening the management structure to improve communication, combining functions where sensible and trimming activities that are not vital to the success of our mission.

To be clear, we will continue to hire rapidly in critical hourly and salaried positions to support the Model 3 production ramp and future product development."

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