Stellantis Laying Off Workers, Scapegoating Electric Vehicles — Come On, Stellantis

December 22, 20221 year ago Zachary Shahan 0 Comments

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It’s no secret that the world has seen some economic troubles as a result of COVID-19 hitting, countless people getting horribly sick and dying, economies shutting down, trillions of dollars being unloaded from governments in order to keep people in lockdown alive and sane, supply chains being broken, economies trying to slowly re-open and get supply chains going again, inflation slamming people’s pocketbooks while corporations make record profits, and various other ramifications. What gets hit with such economic troubles? Among other things, car purchases.

That said, there has been one bright spot in the auto market. Electric vehicle sales have soared and their market share has risen even faster. True, the US is behind the curve, but the EV market has grown here, too. So, when Stellantis recently went, “Mer, mer, we’re laying off factory workers because EVs,” the trash talking immediately jumped out to me.

More specifically (and accurately), Stellantis wrote: “Our industry has been adversely affected by a multitude of factors like the ongoing Covid-19 pandemic and the global microchip shortage, but the most impactful challenge is the increasing cost related to the electrification of the automotive market.” The bigger issue was actually the CNN Business headline, which was misleading. “Stellantis to idle Illinois plant, lay off more than 1,000 workers, citing rising costs for EVs,” it read. “Rising costs for EVs” implies that EVs are expensive and that somehow led to layoffs, like people weren’t buying enough EVs because they were expensive. As you can see above, Stellantis’ actual note was “cost related to the electrification of the automotive market.” It’s still blaming EVs, but this is different. As we’ve been saying for years, legacy automakers have a big challenge because they need to wind down fossil-powered car factories, production lines, and supply chains while winding up EV factories, production lines, and supply chains. Both come with costs. With the former, they have to write off investments, sunk costs, that didn’t generate as much revenue as anticipated and are no longer needed. They also have declining economies of scale as people buy fewer and fewer gasmobiles. With electric vehicles, they have to get to profitable economies of scale. Tesla wasn’t profitable until it was mass producing the Model 3 at a sufficient rate. It’s the same story for model after model, no matter who produces it — you pay off all of the investment costs and operational costs once the production rate is high enough (and, of course, the price comes into play here, too).

So, yes, surfing that transition from gas-powered vehicles to electric vehicles is tough, and entails a cash crunch. But the best way to do it well? Create really compelling EVs and scale up production quickly so that they are bringing in big profits for the company as soon as possible. Being late to the part (like Stellantis has been), trash talking EVs for years (like Stellantis has done), not creating the most compelling and most breakthrough EVs on the market — well, it gets harder. It’s like not practicing a sport, complaining about your teammates and the fans, and then discovering that you’re not that good, no one wants to pass the ball to you, and the fans aren’t eager to cheer for you.

Anyway, in order to “stabilize production” and “improve efficiency,” Stellantis is idling a factory in Illinois and laying off about 1000 workers there. The automaker will try to find them positions elsewhere as much as possible, and will try to find another use for the Belvidere factory.

But what vehicles are so unpopular or declining in demand so much that they are not worth producing. Well, that would be the Jeep Cherokee. That’s not an electric vehicle. Also, it happens to be a bit of a competitor to the now wildly popular Tesla Model Y. Perhaps the real issue with EVs is that they are eating into Jeep’s consumer demand. Perhaps the Ford Mustang Mach-E, Volkswagen ID.4, Tesla Model Y, Ford F-150 Lighting, and other EVs are stealing customers from Stellantis. Perhaps the prime issue for Stellantis is that unless it has compelling electric vehicles on the market, it’s going to lose sales, and it doesn’t have much in the way of compelling electric vehicles on the market at this point. Perhaps if it had prepared for the EV future sooner instead of repeatedly trying to ignore it, complaining about it, and telling customers to not buy its EVs….

Unsurprisingly, the United Auto Workers International Union is none too please about this situation, and said on Facebook (of course) that they were “deeply angered.” Furthermore, they said it was “unacceptable” that the automaker didn’t have new products ready that it could produce at the Illinois plant. Perhaps they should have been more angered and more communicative a few years ago when Stellantis was dragging its feet on EVs and telling customers to not buy their own models. Perhaps they should have spoken up when Stellantis was making the mistake of being a conservative curmudgeon rather than humbly accepting that auto tech was changing, batteries were getting cheaper, electric vehicles were already better than gas-powered cars in several ways, and the future was electric. It’s easy to complain about a negative result as it’s arriving; harder to spot the problem that’s popping up that’s going to create that negative result. So, the United Auto Workers International Union wasn’t prepared to do that a few years ago — at least now it’s pushing for a strong move into EVs, right? Right? …

Well, I don’t know about the auto workers union, but it seems Stellantis finally gave in — even if it’s still complaining about being dragged into the future. Last year, in July, Stellantis committed to investing $35.5 billion into the electric vehicle transition. Stellantis CEO Carlos Tavares said that they were targeting 70% plugin vehicle sales (full electrics and plugin hybrids) in Europe by 2025, and 40% plugin vehicle sales in the USA by 2025. At last — bold targets (as long as that doesn’t involve too many plugin hybrids). Now the question is whether, with this late start and continued EV trash talking, Stellantis can reach those targets, not lose too many sales, and survive financially. We’ll see. In China, where the EV transition has long left the station, the Stellantis joint venture for producing Jeep vehicles filed for bankruptcy this October. Perhaps being too late and too slow there is getting under Stellantis execs’ skin. Just design some good electric vehicles, get them on the road, and start putting out strong, positive statements about EVs instead of naysaying and bitter complaints.

Note: While Stellantis may not have much on offer in North America in the way of EVs, it is now the second best seller in the European plugin vehicle market! That is largely on the back of Peugeot, which is a major brand in Europe and nonexistent in the USA, as well as Fiat, which is a major brand in Europe and almost dead in the USA.