SolarCity and Tesla used the word that should freak out a lot of their employees

Milton office space

It’s official, the two public parts of Elon Musk’s empire are combining.

SolarCity announced Monday that it has agreed to a $2.6 billion deal to be acquired by Tesla, ending a process that began in late June.

While a post on SolarCity’s blog was upbeat, saying that the firms will create “the world’s only vertically integrated sustainable energy company,” it also used the one word that should worry both Tesla and SolarCity employees: synergies.

“We expect to achieve cost synergies of $150 million in the first full year after closing,” said the post from SolarCity.

Elon Musk, the founder of Tesla and a board member of SolarCity, has also been trumpeting that ability of the combined companies to be leaner and work well together.

While the word itself appears benign, it should make employees nervous because synergies mean cost cutting and at least some of the cost cutting will come in the form of layoffs.

According to their annual reports, SolarCity employed 15,273 people at the end of 2015, while Tesla had 13,058.

Here’s a very rough, back of the envelope calculation that should be taken with a grain of salt illustrating the effect synergies could have on employees at these two companies. Assuming half of those potential synergies — $75 million — come from reduced headcount and each worker costs the company $75,000, we could see around 1,000 employees let go.

The SolarCity post did not specify a headcount reduction, and the deal is certainly about much more than that, but it is safe to assume some employees should get a bit nervous.

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