SunPower on Wednesday announced several belt tightening measures and slashed executive salaries, citing uncertainty related to COVID-19. The company said the efforts would save up to $50 million as it navigates an unpredictable 2020.
The distributed solar and storage company also withdrew the guidance it offered in February for full year 2020, with GAAP revenue at $2.1 to 2.3 billion and between 2.5 and 2.75 gigawatts shipped during the year. The company still plans to finalize its separation from its international manufacturing arm, which will become a company called Maxeon Solar Technologies, in the second quarter of the year.
In the meantime, the salaries of CEO Tom Werner and SunPower Technologies CEO Jeff Waters, who will lead Maxeon once the split closes, will drop by 30 percent (they’ll still make a healthy $420,000 per year). Pay for executive vice presidents of various divisions of the company will drop 25 percent, to range from $251,250 to $326,250. “Progressive” salary cuts trickled from the top through to senior managers, with managers and less senior employees currently insulated from the changes. The company also froze hiring and promotions and is delaying investments to transition some manufacturing to its newer Maxeon 5 technology.
Werner framed the changes as a proactive attempt to financially prepare for the worsening impacts of the coronavirus in the U.S. Globally, cases of the virus reached 414,179 on Wednesday, with deaths topping 18,000. As epicenters of the virus expanded beyond solar manufacturing centers in China and began to proliferate in the U.S., SunPower’s concerns evolved from equipment supply to consumer demand.
The company last week began discussing ways to “reduce the likelihood that we had to impact employees, particularly employees that couldn’t afford to be impacted,” Werner told Greentech Media. Though the company has not cut any jobs, Werner acknowledged “the world is changing very fast” and other workers may be impacted as infections continue to spread. In Q4 2019 SunPower said it already expected losses of up to $195 million in 2020.
Drops in demand for SunPower’s service have so far overlapped with areas with issued shelter-in-place orders and the regions most impacted by the virus, such as New York. Seven percent of the world’s cases are now in New York, according to the New York Times. Due to the rapidly rising number of cases in the state and public safety measures instituted to stem the increase, Werner said both residential and commercial installations have been somewhat restricted, though most solar companies are treating employees as “essential,” which means they can continue working under jurisdictional shutdowns.
Werner hinted at a coming advisory from the New York State Energy Research and Development Authority that may limit the company’s activity in the state. NYSERDA did not respond to immediate request for comment on the potential guidelines.
In California, which instituted a statewide shelter in place order on March 19, SunPower is working through its pipeline but anticipates a potential cliff in demand.
“So far we’ve had enough backlog and enough constructive things for our field teams to do in California, but that won’t go on indefinitely,” said Werner.
Nationwide, the company’s “leading indicators,” which measure possible future demand, show dips between 5 and 30 percent. Werner said the “super dynamic” situation makes it difficult to quantify actual decreases in demand at this time.
The pandemic that’s upending lives and industries across the globe comes at a pivotal moment for SunPower. The company, which logged two profitable quarters in 2019, is in the process of streamlining its balance sheet, rehabilitating its finances and reorienting as a pureplay residential solar, storage and services provider.
Werner said SunPower is acting now to avoid as much disruption as possible to those efforts.
“We’re making the cost reductions we are so we can stay on the path we were on previously, in terms of de-levering our balance sheet,” he told GTM. “We’re very fortunate that we have been working hard on our balance sheet and simplifying our financials. We are less dependent on capital markets and the capital markets right now are very unstable.”