Carlos Tavares, the CEO of Stellantis NV, addressed media representatives at the Stellantis automotive manufacturing facility in Sochaux, France, on Thursday, October 3, 2024.
Stellantis plans to close and sell its extensive vehicle proving grounds in Arizona by the end of this year, as reported by CNBC. This decision is part of a series of cost-cutting measures by the trans-Atlantic automaker under CEO Carlos Tavares. The company has faced increasing pressure from Wall Street, dealers, and the United Auto Workers union due to its underwhelming financial performance, layoffs, and business strategies.
The Arizona Proving Grounds, spanning 4,000 acres between Phoenix and Las Vegas in Yucca, Arizona, has been used for vehicle testing and development since the land was acquired for $35 million from Ford Motor in 2007 by the then-Chrysler entity. The closure was confirmed by three sources who requested anonymity due to the private nature of the discussions.
Stellantis intends to transition to using a proving ground owned by Toyota Motor in Arizona starting next year. Toyota, having opened its costly-to-maintain operations to other companies in 2021, has allowed Stellantis this opportunity. This information comes from two individuals familiar with the decision.
The closure was officially acknowledged by Stellantis on Friday morning, referencing ongoing cost management and real estate assessments as reasons. In an emailed statement, the company expressed its commitment to seeking efficiency improvements and footprint optimization to remain competitive in today’s rapidly evolving global market.
Stellantis further stated it is negotiating with the UAW to provide proving ground employees with special packages, or the option to transfer with their jobs, though employees may face an “indefinite layoff,” entitling them to pay and benefits for two years. Currently, the Arizona Proving Grounds employs 41 people, among them 37 hourly workers represented by a UAW local chapter. The UAW, which has criticized Tavares’ decisions and related layoffs, did not comment on the planned closure.
Automakers, including Stellantis, maintain proving grounds across various climates and geographic locations to develop and test new vehicles before sale. Stellantis’ other major proving ground in the U.S. occupies a 4,000-acre campus west of Detroit in Chelsea, Michigan.
The Arizona site was among 18 facilities that Stellantis informed the UAW could potentially close during last year’s contract negotiations. Many of the other operations were parts and distribution centers expected to consolidate into “mega sites,” along with the company’s large metro Detroit campus that formerly served as Chrysler’s world headquarters. The status of these properties remains unclear, though local and state politicians, including Michigan Governor Gretchen Whitmer, have expressed concerns over the potential closure of the former headquarters in Auburn Hills, Michigan.
Stellantis has notably reduced its U.S. workforce in recent years as part of cost-cutting strategies under Tavares. The automaker reduced its workforce by approximately 47,500 employees (15.5%) from December 2019 to the end of 2023, including a 14.5% reduction in North America, as revealed in public filings. This count does not include further reductions and layoffs in the current year.
By the end of the last year, Stellantis employed roughly 11,000 U.S. salaried staff, compared to 53,000 at General Motors and 28,000 at Ford. The reductions align with Stellantis’ strategy to outsource many engineering functions to lower-cost countries like Brazil, India, and Mexico, as reported by sources familiar with the situation.
Earlier this year, Bloomberg News highlighted Stellantis’ initiative to recruit a significant portion of its engineering workforce in these countries, where the cost per employee is approximately €50,000 ($53,000) or less annually, significantly below the costs of comparable roles in the U.S. and Europe.
