The staff moves signal recalibration after electric vehicle sales and autonomous technology performance have failed to keep pace with industry expectations, according to experts. Reduced EV capacity investments and delayed timelines have delayed, even canceled, some planned spending as the market struggles to find demand from mainstream
Meanwhile, higher labor costs, including from record labor agreements between the United Auto Workers and the Detroit Three, have increased expenses. Production volumes have been erratic from COVID-affected supply chains, the microchip shortage and last year's United Auto Workers strike. The threat of foreign competition, particularly from the Chinese, stresses the need to profitably produce low-cost EVs; right now, battery-powered models are more expensive to produce and have smaller margins — if they're profitable at all — than traditional gas-powered vehicles.
It's all a recipe for rebalancing budgets and cutting where companies can.
"Some of the cuts are related to a pivot from the first wave of EVs, which was get the vehicle out there, build capacity, go," said Mark Wakefield, manager director in Detroit for consulting firm AlixPartners, "to the second wave of 'Let's make a competitive EV' and even the third wave of 'Let's make money off this vehicle.' "
The result is a change in the dynamics of how companies are approaching their strategies.
"At first you're hiring as many engineers as you can. You're optimizing speed to market," Wakefield said. "In today's environment, it's less about speed to market, but having a compelling offering and cost of doing it. There may be some adjustments from doing that."
Estimates put U.S. auto sales in 2023 around 15.5 million, and several forecasters are expecting closer to 16 million in 2024. Electric vehicles could hit 10% market share this year, too. Still, the growth is less aggressive than what the industry expected a year or so ago, and that's affecting both blue- and white-collar jobs.
Just as it revealed its R2 model, Rivian Automotive Inc. last week said it's halting plans to build a multibillion-dollar factory in Georgia that was supposed to create 7,500 jobs. This move to save $2.25 billion comes after the California-based EV startup said it was cutting the third shift effective April 28 at its plant in Normal, Illinois, though all hourly employees were being offered jobs on the other two shifts. Rivian had said vehicle production was expected to be flat in 2024, but improvements in manufacturing processes would allow it to meet that goal with two shifts and save on costs. Rivian's net loss last year was $5.432 billion compared to $6.752 billion in 2022.
Rivian last month also said it was laying off 10% of salaried employees along with some non-manufacturing hourly employees. At the time, it had 16,700 hourly and salaried workers. It declined to provide a further breakdown.
“Our business is facing a challenging macroeconomic environment — including historically high-interest rates and geopolitical uncertainty — and we need to make purposeful changes now to ensure our promising future," Rivian CEO RJ Scaringe wrote in an email to employees. "We must strategically prioritize our growth areas of the business, including the launch of Peregrine and R2 as well as investing in our go-to-market capabilities. We’ve recently implemented several organizational and leadership changes, but we need to do more to achieve our strategic priorities."
Ford Motor Co. last month said it was reducing production of the all-electric F-150 Lightning truck to one shift starting April 1, affecting 1,400 jobs in Dearborn, to balance production and consumer demand. Roughly 700 workers were expected to take advantage of the 900 positions being hired in Wayne for a new third shift assembling Bronco SUVs and Ranger midsize trucks, which are both gas-powered vehicles. Other workers affected received job offers at other nearby plants. Ford posted $4.3 billion in profit last year, though its Model e EV division lost $4.7 billion.
“We are taking advantage of our manufacturing flexibility to offer customers choices while balancing our growth and profitability," CEO Jim Farley previously said in a statement.
General Motors Co. late last year laid off 945 workers at its Orion Assembly plant in Michigan after ending production of the all-electric Bolt EV and EUV. All of the employees have been offered transfers to other plants, according to GM. The Orion plant will eventually reopen for electric truck production. GM last year delayed launch of the trucks there by one year until late 2025.
GM also late last year laid off 369 employees working at the Lansing Grand River Assembly plant in Michigan after ending production of the Chevrolet Camaro muscle car. According to GM, two-thirds of the eligible represented employees affected by the end of Camaro production have been offered work.
Meanwhile, Stellantis NV is launching its first electric vehicles this year in North America. Since ratifying a new contract with the UAW that included a buyout offer this year, the automaker has announced several rounds of job cuts across its U.S. footprint, affecting hundreds of workers and particularly on-call, lower-paid supplemental workers. The automaker has cited efficiency and contractual commitments in the decisions. Stellantis posted a record $20 billion net profit in 2023.
Bumpy ride for autonomy
Autonomous vehicle companies have also cut jobs to keep down costs amid a bumpy forecast for the widespread rollout and acceptance of robotaxis and other automated services.
GM's embattled Cruise LLC autonomous vehicle unit in December laid off 24% of its workforce amid a series of changes it's undertaking while under scrutiny for its safety standards. Cruise has hired a new chief safety officer and is working to regain the trust of the public and regulators before relaunching its services.
Last month, Hyundai Motor Co.-backed Motional made a less than 5% staff reduction in non-technical roles "to reallocate resources to areas of the company that will directly enable long-term success," according to a statement sent by spokesperson Akshay Jaising. The cut came after the operator of a robotaxi service in Las Vegas lost auto supplier Aptiv PLC as a backer. Motional also has an autonomous pilot with Uber Eats in Santa Monica, California.
Ann Arbor, Michigan-based AV company May Mobility in mid-February said it would reduce its workforce by about 13% as a way to take “proactive and strategic steps to increase our focus on the company’s highest business priorities," the company said in a statement at the time.
The layoffs come after the AV company in November said it closed a $105 million Series D round, bringing its total funding to about $300 million. May Mobility CFO Anna Brunelle, in a statement to The Detroit News, said the reduction allowed the company "to focus on limited hiring in the areas of autonomy engineers and roles that directly support our commercialization progress."
She added: "Our focused approach underscores our commitment to keeping costs low while attracting strategic investors and developing new technology that will propel our industry forward. We believe this transition strengthens our operational efficiency and puts May Mobility in the best position for growth to better serve our customers across markets.”
Suppliers cut costs
Auto suppliers are also feeling the effects of increased scrutiny on EV adoption timelines. Comments from automaker executives have swung dramatically in the last 15 months, said Warren Browne, an auto supplier consultant and former GM executive who worked at the automaker for 40 years.
"It was we're all-in on electric, (President Joe) Biden is going to give us tons of money, everybody is going to be all-in," Browne said. "Suppliers geared up to meet that vision, to meet that acceleration curve. Now, 15 months later, reality has come. That curve has slowed down, and they have to react."
Our Next Energy Inc. last week cut 37 mostly administrative workers to reinforce its "commitment to its research & development, engineering, supply chain and manufacturing functions," Dan Pierce, a spokesperson for the privately owned Novi battery startup, said at the time. The layoffs came under new CEO Paul Humphries after the company cut a quarter of its staff in November to focus on "core priorities." That cut followed a failed Series C fundraising round even though the startup had been valued at more than $1 billion earlier in 2023.
Aptiv PLC — a manufacturer of vehicle electrical distribution systems, connection systems and smart-vehicle architectures — last month in an annual filing to the U.S. Securities and Exchange Commission disclosed it had cut nearly 4% of its global employees last year, dropping its salaried employee count by 1,000 and hourly workers by 5,000. It had 154,000 employees globally.
The Ireland-based supplier with North American operations based in Troy spent $211 million on “employee-related and other restructuring charges." About $68 million of that was in the fourth quarter, mostly because of salaried-employee reductions in North America and Europe. Another $75 million charge is expected in 2024.
"The Company plans to implement additional restructuring activities in the future, if necessary," the company said in the SEC filing, "in order to align manufacturing capacity and other costs with prevailing regional automotive production levels and locations, to improve the efficiency and utilization of other locations and in order to increase investment in advanced technologies and engineering.”
Requests for comment from Aptiv went unanswered. On a recent earnings call, Chief Financial Officer Joe Massaro said the supplier was pursuing an increased margin in 2024. The company reported a net income of $2.909 billion in 2023, up more than four times the previous year's amount.
"These (cost reductions), as well as our continued focus on our overall cost structure and footprint, are necessary," he said, "as we expect to see continued labor and operating cost pressures, particularly in our Mexico operations over the coming years."
Competitor Continental AG has also made workforce reductions. The German supplier, which has its North American automotive headquarters in Auburn Hills, Michigan, disclosed measures in November to strengthen its competitiveness in the auto sector by reducing costs by $437 million (400 million euro) annually by 2025. The measures to trim business and administrative departments will affect around 5,400 jobs globally.
In February, Continental said by the end of 2025 it'll streamline its research and development, affecting about 1,750 jobs worldwide, including 380 at its software subsidiary Elektrobit, bringing Continental’s total affected jobs to more than 7,000. About 40% of the reductions will affect employees in Germany, Automotive News Europe reported.
On March 7, Continental noted in its earnings report it expects wages and salaries this year to rise to $547 million (500 million euro). Half of those costs are related to its automotive unit, which includes the business areas of architecture and networking, autonomous technology, user experience and software. The auto unit’s sales increased by 10.8% in 2023 from 2022, Continental reported Thursday.
Forvia, a French auto supplier formed in 2022 after Faurecia acquired Hella, recently announced a project to adapt operations, which could affect 10,000 jobs through 2028, partly through attrition. The company, which has its North American headquarters in Auburn Hills, is also planning to “immediately and drastically” reduce its European recruitment.
The world's seventh-largest auto supplier, which says its parts appear on close to half of vehicles produced globally, presented its "EU-Forward project" in February. It's expected to result in annual cost savings of about $547 million (500 million euro) in 2028 across its European operations.
The project is meant to help the company adapt to the “fast-changing environment,” which includes the 2035 ban on internal combustion engine vehicles in Europe and the increasing number of Asian competitors. Forvia also is seeking to improve its profitability in the region.
CEO Patrick Koller said on the company’s earnings call that Forvia needs “to get prepared” for the coming Asian automakers that “will not come alone.”
“They will also come with some of their traditional suppliers," he said. "We have to improve our competitiveness. And we have to secure our strong European positions."
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