Tech

Tesla suspending production at Bay Area factory amid coronavirus outbreak

Key Points
  • Tesla announced Thursday it will temporarily suspend production at its Fremont, California factory at the end of the day on March 23.
  • Tesla said basic operations at the plant would continue "to support our vehicle and energy service operations and charging infrastructure, as directed by the local, state and federal authorities."
  • The company announced it is also trying to implement "touchless deliveries" in certain locations, reducing contact with Tesla workers during the coronavirus pandemic. 
Elon Musk, chief executive officer of Space Exploration Technologies Corp. (SpaceX) and Tesla Inc., speaks during an event at SpaceX headquarters in Hawthorne, California, U.S., on Thursday, Oct. 10, 2019.
Patrick T. Fallon | Bloomberg | Getty Images

Tesla announced Thursday it will temporarily suspend production at its Fremont, California factory at the end of the day on March 23. This comes after the county where the factory is based told Tesla it would not be considered an "essential business" under the "shelter-in-place" order aimed at tamping down on the spread of the coronavirus.

Tesla shares fell about 9% after hours on the news.

Tesla said basic operations at the plant would continue "to support our vehicle and energy service operations and charging infrastructure, as directed by the local, state and federal authorities." The company will also temporarily suspend production at its factory in Buffalo, New York besides that for parts and supplies it said are "necessary for service." Tesla plans to use that facility to ramp up production of Solar roofs and related items. Operations at other facilities will continue, the company said in a press release.

"Despite taking all known health precautions, continued operations in certain locations has caused challenges for our employees, their families and our suppliers," Tesla said in the release.

In an email to employees obtained by CNBC, Tesla Head of Human Resources for North America Valerie Workman said the facilities would "transition to minimum basic operations to support our vehicle and energy service operations and customers, and Supercharging infrastructure, as directed by authorities" beginning March 24.

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Tesla to suspend production at Fremont, CA, & Buffalo, NY, facilities due to coronavirus

Workman told employees: "Hourly employees in the Bay Area and Buffalo factories will continue to receive their normal pay through Monday, after which point we will provide paid leave during suspended operations. Those who have been working from home should continue to do so and consider it business as usual."

The e-mail did not mention Tesla's warehouse and metering facility in Livermore, California, which is also part of Alameda County, where the shelter-in-place orders are in effect. CNBC reached out to the Livermore police department to find out if that facility will also be required to reduce work to minimum basic operations.

Workers had been lobbying Tesla's management to shut the plant, or at least tell them what the company's plans were amid the COVID-19 pandemic. Earlier this week, they circulated a petition via Change.org. Tesla employees were told Monday that factories were still open for business, though they could stay home if they felt sick or uncomfortable. 

"I will personally be at work, but that's just me. Totally OK if you want to stay home for any reason," CEO Elon Musk wrote in an email to staff Monday.

By Tuesday, the county sheriff said on Twitter that Tesla would not be defined as an "essential business" under the order, throwing its operations into question.

Enough cash for 'extended period of uncertainty'

The company announced Thursday it is also trying to implement "touchless deliveries" in certain locations, reducing contact with Tesla workers during the coronavirus pandemic. 

"Due to the unique over-the-air connectivity of our vehicles, customers are able to unlock their new cars at a delivery parking lot via the Tesla App, sign any remaining relevant paperwork that has been placed in their car, and return that paperwork to an on-site drop-off location prior to leaving," Tesla said in the announcement.

Tesla said it believes it has enough cash on hand to get through this temporary closure. The company said it had a cash position of $6.3 billion at the end of the fourth quarter of 2019 before its recent $2.3 billion capital raise. Tesla also said it had about $3 billion in available credit lines at the end of the fourth quarter of 2019.

"We believe this level of liquidity is sufficient to successfully navigate an extended period of uncertainty," the company said in the release.

Here is the full email from Workman:

Hi Team

In the past few days, we have met with local, state and federal officials and are continuing to follow all health guidelines in our operations to keep you safe. While we are taking all recommended precautions and continue to operate as a national critical infrastructure as defined by the federal government, continued operations in certain locations due to shelter in place restrictions have been challenging for our employees, our families and our suppliers.

As a result, we have decided to temporarily suspend production at our Fremont factory from end of day March 23. You should continue to report to your current location through end of day Monday, as current operations will continue over the next few days. Again, if you are not feeling well or are concerned about coming into the office, please contact your manager and stay at home. We respect your decision.

Starting Tuesday, March 24 we will transition to minimum basic operations to support our vehicle and energy service operations and customers, and Supercharging infrastructure, as directed by authorities.

In addition, our factory in New York will temporarily suspend production as well, except for those parts and supplies necessary for service, infrastructure and critical supply chains. Production in our other facilities will continue, including operation of our service centers and Supercharging network.

Hourly employees in the Bay Area and Buffalo factories will continue to receive their normal pay through Monday, after which point we will provide paid leave during suspended operations.

Those who have been working from home should continue to do so and consider it business as usual. We understand you will have many questions and we will be providing you with additional resources in the coming hours and days. Please get in touch with your manager or HR partner for more information. Thank you all so very much for all you do.

Valerie

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