Electric automaker Tesla Motors fired hundreds of employees this week, including workers at its Fremont, Calif. factory and corporate managers, as it tries to solve production problems for its recently released Model 3.
An estimated 400 to 700 people were dismissed this week, according to a San Jose Mercury News report published Friday afternoon. That’s between 1% and 2% of the company’s more than 33,000 employees. Former and current employees told the Mercury News that little or no warning preceded the dismissals.
A Tesla spokesman would not confirm that number but told Fortune that the move follows its annual performance reviews, which typically involve both involuntary and voluntary departures.
“Like all companies, Tesla conducts an annual performance review during which a manager and employee discuss the results that were achieved, as well as how those results were achieved, during the performance period,” a Tesla spokesman said in an emailed statement. “This includes both constructive feedback and recognition of top performers with additional compensation and equity awards, as well as promotions in many cases. As with any company, especially one of over 33,000 employees, performance reviews also occasionally result in employee departures. Tesla is continuing to grow and hire new employees around the world.”
Tesla insists that the losses are not layoffs and that it plans to backfill the positions. That’s likely accurate, at least for jobs in California. State law requires companies to notify employees of layoffs through its WARN notification system. There are no records of new layoffs from Tesla. About 200 Tesla and SolarCity employees in the company’s Roseville, Calif. offices were notified Aug. 30 that they would be terminated.
The latest cuts come as the automaker tries to fix bottlenecks on the production line for its Model 3, an all-electric model designed to appeal to the masses. Earlier this month, Tesla reported that it produced 260 Model 3 cars in the third quarter, of which it has delivered 220. That figure is far less than CEO Elon Musk’s prediction that Tesla would produce more than 1,600 of the vehicles by September.
In July, Musk tweeted a production update for the Model 3, saying the car had passed all regulatory requirements ahead of schedule. After announcing that the first 30 customers would receive the Model 3s on July 28, Musk wrote, “production grows exponentially, so Aug should be 100 cars and Sept above 1,500.”
Altogether, Musk said that third quarter production numbers for the Model 3 would be around 1,630 vehicles—a prediction off by 84%.
A Wall Street Journal report published earlier this month revealed that Tesla workers were assembling Model 3 vehicles by hand until at least early September. One of the “bottlenecks”Musk alluded to was a process that involved positioning and welding body panels by hand, rather than by precision robots, according to workers interviewed by the Journal.
Musk recently delayed the unveiling of an electric semi-truck until Nov. 16 so the company can focus its attention on production problems with its new mass-market car, the Model 3.
FORTUNE
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