SpaceX cutting 10 percent of its staff to become a leaner company

“We must part ways with some talented and hardworking members of our team.”

Eric Berger – Jan 11, 2019 8:30 pm | 523

SpaceX chief Elon Musk made the decision to cut 10 percent of his workforce. Credit: FilmMagic/FilmMagic for HBO

SpaceX will lay off up to 10 percent of its work force, the company said Friday evening. The company characterized the job cuts as “a strategic realignment” designed to ensure it is positioned to succeed for the long term.

The cuts were announced to employees Friday in an email from SpaceX President and Chief Operating Officer Gwynne Shotwell. The company has a work force of more than 6,000 employees.

“To continue delivering for our customers and to succeed in developing interplanetary spacecraft and a global space-based Internet, SpaceX must become a leaner company,” a company official said in a statement. He continued:

Either of these developments, even when attempted separately, have bankrupted other organizations. This means we must part ways with some talented and hardworking members of our team. We are grateful for everything they have accomplished and their commitment to SpaceX’s mission. This action is taken only due to the extraordinarily difficult challenges ahead and would not otherwise be necessary.

This move comes several weeks after SpaceX reportedly sought to raise up to $750 million from a loan but decided to cut that amount to $250 million because of less favorable terms than anticipated.

Money for new projects

Company officials have repeatedly said that SpaceX is profitable, thanks to a mix of revenues from commercial launch contracts, NASA development funds, and US Air Force launch awards. SpaceX launched its Falcon 9 rocket 20 times in 2018 and flew its Falcon Heavy rocket for the first time. By developing a reusable first stage, the company has perhaps the most innovative and cost-effective booster in the world.

However, SpaceX is also undertaking the costly development of a satellite Internet system, Starlink, as well as a next-generation rocket, Super Heavy, and spacecraft, Starship, designed to send humans to Mars. Both of these projects are several years from providing a significant revenue stream.

SpaceX is undertaking these cuts as it moves into a pivotal year. In 2019, it will likely perform the first launch of humans into orbit by a private company through NASA’s commercial crew program, deploy its first set of Starlink satellites, and begin preliminary tests of its Starship vehicle.

One aerospace industry source suggested that the size and timing of Friday’s cuts may indicate a desire by SpaceX Chief Executive Elon Musk to reduce costs and cut some of its lower-performing employees. By becoming leaner, the company will have more funds to invest in its ambitious development projects. The cuts also come as the company needs to produce fewer Falcon 9 rockets and Merlin engines, as it moves aggressively to rocket re-use.

Ironically, in recent years, SpaceX’s development of the low-cost Falcon 9 rocket has, in part, driven other launch providers in the United States, including United Launch Alliance, as well as government-backed corporations around the world to slash costs and employees to compete for commercial launch contracts.