Stellantis Will Buy Out Thousands of Hourly Employees to Cut Costs for EV Making
Stellantis will part ways with thousands of union employees in the coming months, Honda has a plan, and life sure is good for battery-maker LG. All that and more in this edition of The Morning Shift for Wednesday, April 26, 2023.
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1st Gear: Stellantis Must Downsize
Electric cars are expensive to make, which is something Stellantis’ Carlos Tavares has been candid about in the past. It’s for this reason that Tavares has been beating the drum about a need to cut costs as the company prepares to launch 25 new all-electric models across its wealth of brands. To that end, the company will shed roughly 3,500 hourly jobs in the U.S. through buyouts and retirement incentives before new contract negotiations kick off with the United Auto Workers union later this year. Courtesy Automotive News:
UAW Local 1264, which represents the Stellantis stamping plant in Sterling Heights, Mich., said in a letter to members that the offers would be made “corporate wide.”
Retirement-eligible workers hired before ratification of Chrysler’s 2007 contract with the UAW can receive $50,000 to leave their job, according to the letter, which Local 1264 posted Monday on Facebook. Employees who have been with the company for at least a year would be eligible for a lump-sum benefit payment, the letter said, without specifying how much that would be.
Workers can sign up for either package from May 6 through June 19. Departure dates are tentatively scheduled for June 30 through Dec. 31, depending on each plant’s needs.
The openings would be filled by workers on indefinite layoff, the letter said.
A Stellantis spokesperson didn’t immediately comment on the plan.
The 3,500-job target would represent about 8 percent of the 43,000 hourly workers who were eligible to collect a profit-sharing check from Stellantis in March.
Of course, Stellantis is hardly alone among the Big Three in this trend. General Motors recently extended “voluntary severance packages” to salaried workers — a move that cut into its first-quarter bottom line as we learned yesterday — while Ford has shed some 3,000 white-collar jobs globally since last summer. Most recently sales for Jeep and Ram, Stellantis’ juggernauts in the U.S., slipped through the first quarter as the Detroit News reported. Jeep in particular saw a whopping 20 percent year-over-year decrease in deliveries over that period.
2nd Gear: Honda Is Nervous
Every carmaker that has existed for some time and intends to continue doing business in China is shaking right now, particularly after the Shanghai Auto Show demonstrated how prepared the country is for an EV-only future. Volkswagen is one; Toyota another. BMW’s CEO Oliver Zipse told Reuters at the event that “what moves Chinese customers today, moves the world tomorrow,” but Honda’s top execs are reflecting on the state of things with a little more alarm. Again, Automotive News:
[Honda] CEO [Toshihiro Mibe] outlined the vision on Wednesday while giving Honda’s annual business briefing. Mibe said Honda executives had an unpleasant surprise at this month’s Shanghai auto show.
Local Chinese brands flooded the exhibition hall with sophisticated, advanced EVs of all kinds.
As COO Shinji Aoyama put it, “We were overwhelmed by the Chinese.”
Mibe said Chinese EVs had made big strides during the COVID-19 pandemic when the world was largely cut off from the country by travel restrictions and quarantine measures.
“They are ahead of us, even more than expected,” Mibe said.
“We are thinking of ways to fight back. If not, we will lose this competition,” he said. “We recognized we are slightly lagging behind, and we are determined to turn the tables.”
Honda rolled into Shanghai earlier this month with three new electric crossover concepts, two of which seem destined for imminent production. Mibe and Aoyama outlined a multi-pronged approach to confront the company’s lack of preparedness, which includes a plan to make 7 percent on EV sales “in the near term” along with greater margins beyond that, and prioritizing development of the brand’s own software platform due to launch in vehicles in 2026. They also talked a lot about pioneering next-generation solid-state batteries and securing ample semiconductor supply, which brings us to…
3rd Gear: Honda and TSMC
Honda has entered into a “strategic collaboration” with Taiwan Semiconductor Manufacturing Company to get the silicon it needs. Surprising though it may seem, this is not historically the sort of agreement carmakers and chipmakers would take on. At least, not before chips became really, really scarce. From Reuters:
Honda will build direct relationships with chip producers for the long-term stable supply of chips, Chief Executive Toshihiro Mibe said at a news conference where he gave an update about the automaker’s business strategy.
“Honda will work closely together with Tier 1 suppliers and semiconductor makers and move forward with drastic steps,” Mibe said, adding it had reached a basic agreement on strategic collaboration with TSMC.
“In the past, there were probably almost no direct discussions between automakers, including Honda, and semiconductor manufacturers,” he said.
The company expected to start seeing an impact from the tie-up with TSMC from the 2025 financial year, Chief Operating Officer Shinji Aoyama said.
The deal included sharing information about production and parts supply with a focus on securing integrated circuits and other parts, he said.
TSMC said in an emailed statement it was committed to serving as its customers “trusted long-term technology and capacity supplier to unleash their innovations”.
“TSMC continues to work closely with major worldwide automobile IC companies to support their success,” it added, without elaborating.
Semiconductor production used to be Japan’s forte. But about “20 years of underinvestment,” in the words of one analyst to The New York Times, left economies of scale and cutting-edge manufacturing in the hands of firms from Taiwan and South Korea.
When the pandemic first began, Toyota initially weathered the shortage reasonably well, because it had stockpiled chips. That stash was never going to last forever, though, and by mid-2022 it was retreating from its production forecast due to a scarcity of them. Who’s to say what the supply chain will look like by 2025, but Honda, like all its peers, is making moves to ensure it never falls into such a rut again.
4th Gear: VinFast Gave Itself a Lifeline
VinFast’s U.S. initial public offering has been continually pushed off for about two years now, but the good news is that the company now has a little more cash to play with, thanks to a fresh $2.5 billion in funding pledges. Unfortunately, $1 billion of those funds appear to have come out of the pocket of its founder, while the rest is courtesy VinFast’s parent company. From Reuters:
Two people familiar with the matter had previously told Reuters that VinFast’s planned U.S. Initial Public Offering (IPO) may be further delayed, with one saying it could be pushed into next year due to unfavourable market conditions.
VinFast had no immediate comment about the impact of the fundraising on its planned IPO on Wednesday. Last week it declined to comment on the listing.
VinFast, which began operations in 2019, is gearing up to expand in the U.S. market, where it hopes to build a car and battery plant to compete with legacy automakers and startups, although shipments of vehicles from its factory in Vietnam have so far proceeded slowly.
Of the new pledges, $1 billion will be provided as a grant within the next year from founder Pham Nhat Vuong, Vietnam’s richest man, the company said in a statement.
Parent company Vingroup, Vietnam’s biggest conglomerate, will provide a grant of $500 million plus a $1 billion loan with a maturity of up to five years.
That would increase total funds raised by VinFast to $10.7 billion, based on earlier company filings.
The grants and loan will “give a push for VinFast to accelerate its development,” the company said.
I feel like it would have been in VinFast’s best interest to keep this information a secret. Essentially giving yourself a loan isn’t a great look, especially if you’re hoping to drum up support for public listing one day. VinFast should’ve just told anyone who asked them where the money came from not to worry about it.
5th Gear: Life’s Good
The battery-making wing of LG, LG Energy Solution, expects it won’t have any trouble achieving its 30 percent growth target for 2023, per Bloomberg:
“EV demand in North America remains very strong,” Chief Financial Officer Lee Chang-sil said on a call after the Seoul-based company reported first-quarter net profit of 500.6 billion won ($374 million), which beat analyst estimates. “Although demand in Europe seems to be limited and metals prices are falling, we’re pretty sure we can meet our initial goal for 30% sales growth for 2023.”
LG Energy expects it will get tax credits from the US Inflation Reduction Act — which is aimed at bringing more battery and EV production to the US — for 15 GWh to 20 GWh of production in 2023. The company, which supplies Tesla Inc., General Motors Co. and Ford Motor Co., eventually aims to have around 250 gigawatt hours of production capacity in the US and develop cylindrical batteries and energy storage systems based on lithium-iron-phosphate batteries.
Meantime, LG Energy is trying to secure battery minerals in order to comply with Europe’s Raw Materials Act, which like the IRA seeks to reduce reliance on Chinese metals for EV batteries. Shortly after the earnings were released, LG Energy said it had signed a $23 billion deal with Posco Future M Co. to supply high-nickel cathode materials.
North American sales will jump this year, with production set to accelerate at a plant jointly built with GM because the US automaker is speeding up output of EVs, according to a note by Yongjin Jung, an analyst at Shinhan Investment Corp. The tax benefits from the IRA will grow every year as US production capacity rises, Jung said.
LG is in a good spot. It has three battery plants in the U.S. alone with GM — two of which are under construction — while it’s also finalizing testing for its cylindrical 4680 batteries for Tesla, with an eye toward beginning manufacturing before the end of this year.
Reverse: Japan’s First U.S. Auto Plant
On this day in 1983 — 40 years ago — Honda made history and officially dedicated its Marysville, Ohio, plant, which was already churning out cars for about six months but had yet to begin full-scale production. That wouldn’t happen for about another year. From a New York Times story published on April 26, 1983:
The plant has become one of the few bright spots in the area’s economy, which has been hurt by plant closings and layoffs. The factory, which cost more than $250 million, is the first passenger-car assembly plant owned by a Japanese company to open in the United States and the second foreign-operated plant to do so.
Honda has been producing motorcycles at a plant next door since 1979. Volkswagenwerk A.G. of West Germany makes cars in New Stanton, Pa. And the Nissan Motor Company, the maker of Datsuns, is nearing completion of a truck assembly plant in Smyrna, Tenn.
At present, the auto assembly line here is moving at a rate of 20 cars an hour, less then half that of most American plants. More striking is the cleanliness of the plant, with not a scrap of paper or refuse on the green painted floor. Honda simply prohibits smoking and eating or drinking in production areas.
The uniforms – worn by all employees, although managers button the white jackets over shirts and ties – are similar to those worn in Honda’s factories in Japan. So is the practice of referring to all hourly employees as ‘’associates.’’ Both ideas are part of an effort to promote identification with the company and greater attention to quality. Each employee had three interviews before being hired and three days of training. The success of these efforts in molding attitudes could not be gauged immediately, since Honda officials refused to let reporters speak to any of the men and women on the line.
Of course, the Marysville facility is still active today. It just recently sent off its 30 millionth vehicle, and will begin retooling for EV production in January 2024.
On the Radio: Filter – ‘The Best Things’
Credit: Filter via YouTube
Something this morning compelled me to listen to my Spotify playlist composed entirely of post-grunge, which itself was inspired by a mix CD that sat in the aftermarket six-disc changer in my brother’s 1997 Ram 1500 during his college days. I was later bequeathed that truck, so songs like Filter’s “Best Things” are burned into my memory. What music did you inherit through the transfer of an automobile?
