Lucid (NASDAQ:LCID) stock is in the red today after the electric vehicle (EV) company announced a restructuring plan involving an 18% reduction of its workforce, or about 1,300 employees. The plan was enacted in order to reduce operating expenses and address “evolving business needs and productivity improvements.”
The layoffs will come at quite a cost. Lucid estimates that it will incur costs of between $24 million and $30 million due to severance payments, stock-based compensation (SBC) and employee benefits and transitions. Lucid adds that it does not expect the SBC related to the layoffs to be material.
These costs will be recognized as cash expenditures. An estimated $22 million to $28 million will be recognized during the first quarter of 2023. The majority of the layoff costs will be paid off by the end of Q2.
LCID Stock: Lucid Lays Off 1,300 Employees
In an internal letter to employees, CEO Peter Rawlinson added the following:
“Our mission remains unchanged. We are committed to a more innovative and environmentally sustainable future – designing, building, and delivering the best EVs on the market as we expand globally and develop more exceptional vehicles such as the Gravity SUV, which we plan to launch in 2024.”
Rawlinson also noted that the job cuts would affect all levels of employees, including executives.
Last year, Lucid produced a total of 7,180 vehicles. For 2023, it expects to build between 10,000 and 14,000 vehicles, which came in below the analyst estimate for about 27,000 vehicles by a wide margin. As of Feb. 21, the company’s flagship model, the Lucid Air, had over 28,000 reservations. The reservations do not include a 100,000 vehicle order from Saudi Arabia’s government.
The Lucid layoffs will definitely reduce operating expenses, although employees are needed to produce vehicles. Whether or not this will affect the 2023 production guidance is still up in the air. In addition, Lucid had a healthy cash on hand balance of $4.4 billion at the end of 2022. CFO Sherry House believes this cash should be enough to continue business operations until Q1 2024.
Still, its apparent that the unprofitable Lucid is stuck in a difficult position. For now, the goal remains to ramp up production, albeit with a smaller employee workforce.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.