Stellantis, one of the Big Three automakers in Detroit, has been traversing troubled waters as of late.
During its earnings call for the first half of 2024 last week, the Jeep and Dodge automaker provided disappointing information.
CEO Statement
During the conference call, CEO Carlos Tavares stated that the company will work to rebound.
He attributed the results to a “challenging industry context” and its own “operational issues.”
‘Significant Work’
Tavares stated, “We have significant work to do, especially in North America, to maximize our long-term potential.”
The automaker is taking drastic measures to reduce the number of workers it employs in order to help cover losses of more than 48%.
A Staggering Fall in Profits
Due to lower sales and restructuring costs, Stellantis’s net profits fell by nearly half during the first half of this year.
However, in the newest spate of layoffs at the Warren Truck plant, Stellantis spokesperson Jodi Tinson said the number of job cuts could be lower. Tinson anticipates fewer layoffs because of early retirement offers already in progress and seniority bumping rights.
Profits Slashed in Half
Stellantis is a car manufacturer born from a merger of Fiat-Chrysler and PSA Peugeot in 2021.
The company’s net profits fell by 48%. Stellantis made $6 billion from January to June this year compared to making $12 billion during the same period in 2023.
Investing in Employees
Union reps have criticized Tavares’ lack of investment in Stellantis employees.
Shawn Fain, President of United Auto Workers, issued a statement criticizing Tavares’ management of Stellantis. “The American taxpayer has invested in Stellantis. Workers have invested in Stellantis. Consumers have invested in Stellantis. It’s time for Stellantis to invest in us.”
Higher Expenses
Automakers are facing higher labor costs, including from historic labor agreements between the United Auto Workers and the Detroit Three.
Production volumes have been inconsistent since the pandemic derailed supply chains. Expenses have also soared since the UAW strike and the microchip shortage. The fall in profits has put companies like Stellantis in a difficult position. It is increasingly difficult to find a balance between investing in workers and prioritizing net profits.
Competition From Abroad
The auto industry in America has been under immense pressure due to the threat of foreign competition. China’s ability to rapidly produce low-cost electric vehicles is forcing American automakers to cut costs where they can.
Mark Wakefield, managing director in Detroit for consultancy firm, AlixPartners, weighed in on the need to restructure automakers to make electric vehicles profitable. “In today’s environment, it’s less about speed to market, but having a compelling offering and cost of doing it.”
Buy Out Employees
According to a report published by the Detroit Free Press, the company is not being very subtle about its situation.
They say that the owners of Jeep and Dodge are offering to buy out their salaried employees at all of their North American locations in an effort to cut down on the white-collar workers who aren’t covered by the UAW contract.
‘Voluntary Separation Program’
The automaker offered employees below the vice president level a package known as the “2024 Voluntary Separation Program” in an email to Stellantis employees.
This package includes three months of outplacement services, severance pay based on years of service as of Sept. 30, 2024, a lump sum cash payment to cover healthcare costs and the vesting of their 401(k)s.
Employee Eligibility
Qualified Stellantis workers were told to expect an email itemizing their individual offers at some point in mid-August.
Stellantis emphasized the Voluntary Separation Program’s significance to the business in an email to employees that was shared with the Detroit Free Press.
Drastic Measures
They suggested that if not enough employees accepted their buyout offers, more drastic measures, such as layoffs, would be taken.
“We wanted to give you some advance notice so you can thoughtfully consider whether this opportunity might be of interest to you,” Tobin Williams, Senior Vice President of Human Resources and Transformation at Stellantis North America, stated.
Internal Preferences
Williams went on to say: “As always, we would prefer to meet our strategic headcount objectives through natural attrition and voluntary programs.”
“Transparently, it is important to note that subsequent involuntary actions may be necessary if we do not meet our objectives through voluntary means.”
Past Layoffs
This is not the first time Stellantis has imposed layoffs on its workforce.
The automaker used a very underhanded method to fire about 400 of its white-collar workers in March 2024 who were not covered by the UAW’s collective bargaining agreement.
‘Mandatory Remote Work Day’
According to reports, Stellantis informed its employees on March 22 that it would implement a “mandatory remote work day [for] all U.S. Salaried Non-Bargaining Unit” engineers and technologists.
Stellantis claimed in the email that the company was holding an “important operational meeting that requires specific attention and participation” and that “employees are expected to work from home” unless a manager tells them otherwise, which was the reason for the mandatory remote work day.
Termination Meeting
Sadly, the “important operational meeting” they attended was their meeting of doom, where they learned that they would be fired.
In a statement to the Detroit Free Press, Stellantis defended its latest moves as necessary in order to keep its operations going.
Share Price Impact
The automaker stated: “As Stellantis continues to address inflationary pressures and, importantly, provide consumers with affordable vehicles at the highest quality, we remain focused on taking the necessary actions to reduce our costs to protect the long term sustainability of the company.”
“One of those actions is offering a voluntary separation package to U.S. employees in certain functions. More detailed information will be provided to eligible employees in mid-August.”
On August 1, the closing share price of Stellantis N.V., which is listed on the New York Stock Exchange under the symbol STLA, decreased by 2.2% to $16.32.
More Layoffs to Come
Stellantis will lay off another 2,450 factory workers. The layoffs are due to the company ending production of the Ram 1500 Classic truck.
The automaker said layoffs at the Warren Truck assembly plant outside of Detroit could come as early as October. Reuters reported the plants would move from two shifts to one in general assembly.
A New Truck in Production
Stellantis is amping up production of the Ram 1500 Tradesmen truck at Sterling Heights Assembly as it ditches the Ram 1500 Classic.
In a statement, Stellantis said: “With the introduction of the new Ram 1500, production of the Ram 1500 Classic at the Warren (Michigan) Truck Assembly Plant will come to an end later this year.”
Union Workers Protected
While no one is safe from losing their job, unionized workers will receive a more comfortable transition out of work.
Laid-off union members would receive 52 weeks of supplemental unemployment benefits from the company. They would also receive 52 weeks of transition assistance, according to Stellantis. The automaker also said they will be entitled to two years of healthcare coverage.
A Domino Effect
The axing of workers at the Warren Truck plant will have a knock-on effect on other parts of the industry.
While the remaining workers will produce the lower-volume Jeep Wagoneer and Grand Wagoneer SUVs, workers at other plants will be vulnerable to more layoffs. The cuts at Warren Trucks will also impact auto parts workers. A Bridgewater Interiors factory in Detroit has also announced it will lay off 63 workers around September 30.
Workers Fighting Back
The Autoworkers Rank-and-File Committee Network does not plan on taking the layoffs quietly.
The committee wrote: “Warren Truck is now a critical battleground in the global war on jobs. Autoworkers must make this the start of a broad counteroffensive, counterposing workers’ right to employment and a decent standard of living against management’s so-called ‘right’ to profits.” The collective plans to protest against both Stellantis and union reps.
Anger at the Unions
The committee expressed anger at the workers’ union, United Auto Workers Local 140, which was supposed to protect their interests.
The union’s Vice President, D. Robinson, admitted that they knew the layoffs were looming and did not warn the workers or even prepare a response. Robinson told Detroit News: “It’s been in discussions for some time. It really was not much of a surprise for me. We hate to see it happen, but we did know the possibility was out there.”
Delay in EV Sales
According to The Detroit News, the cuts to automaker staff reflect a stagnation in the industry.
Electric vehicle sales and autonomous technology performance have not kept up with industry expectations. Reduced EV capacity and delayed timelines have stalled, and even canceled, some planned spending. The market is struggling to find demand for EV vehicles from mainstream buyers.
