Carlos Tavares, the Chief Executive Officer of Stellantis NV, addressed the media at the Stellantis auto manufacturing plant in Sochaux, France, on October 3, 2024.
Stellantis, the automaker, has announced plans to close and sell its extensive vehicle proving grounds in Arizona by the end of this year, according to information obtained by CNBC. This decision is part of a series of cost-cutting strategies implemented by the company under CEO Carlos Tavares. These measures come amidst increasing pressure from Wall Street, dealers, and the United Auto Workers (UAW) union due to the company’s underwhelming financial performance, layoffs, and overall business decisions.
The Arizona Proving Grounds, which span 4,000 acres between Phoenix and Las Vegas in Yucca, Arizona, have been utilized for vehicle testing and development since the property was purchased by then-Chrysler for $35 million from Ford Motor Company in 2007. The closure has been confirmed by three individuals familiar with the plans, who requested anonymity due to the private nature of the information.
Stellantis intends to utilize a proving grounds facility in Arizona owned by Toyota Motor starting next year. Toyota had opened its operations to other companies for rental use in 2021.
Stellantis confirmed the closure on Friday morning, attributing the decision to ongoing cost-cutting and real estate evaluations. The company emphasized its efforts to improve efficiency and optimize its operational footprint in a rapidly evolving global market. The automaker also mentioned collaboration with the UAW to offer employees at the proving ground special packages or the option to transfer operations. Employees could also face indefinite layoffs, which would entitle them to pay and benefits for two years. Currently, 41 employees work at the Arizona Proving Grounds, including 37 hourly workers represented by a local chapter of the UAW. The UAW, which has been critical of Tavares and the layoffs, did not respond to requests for comment on the planned closure.
Stellantis, like other automakers, operates multiple proving grounds in various climates and geographies to develop and test vehicles before selling them to consumers. Its other major U.S. facility is a 4,000-acre campus located west of Detroit in Chelsea, Michigan.
The complex in Arizona was one of 18 facilities that Stellantis notified the UAW might potentially close during last year’s contract negotiations with the union. Most of the other operations expected to be consolidated into “mega sites” were parts and distribution centers, along with the company’s 500-acre campus in metro Detroit, previously used as Chrysler’s world headquarters. The status of other properties remains unclear, although local and state politicians, including Michigan Governor Gretchen Whitmer, have voiced concerns that Stellantis might close the former headquarters in Auburn Hills, Michigan.
Stellantis has significantly reduced its U.S. workforce in recent years as part of Tavares’ cost-cutting initiatives. Between December 2019 and the end of 2023, the automaker reduced its employee headcount by 15.5%, approximately 47,500 employees, including a 14.5% reduction in North America. These figures exclude further reductions and layoffs this year.
As of the end of last year, Stellantis employed around 11,000 salaried employees in the U.S., compared to 53,000 at General Motors and 28,000 at Ford. The workforce reductions accompany Stellantis’ strategy to outsource many engineering functions to lower-cost countries, such as Brazil, India, and Mexico. Bloomberg News reported earlier this year that Stellantis predominantly hired engineers in these countries, with costs per employee significantly lower than those in the U.S. and Europe.
