Stellantis’s assembly plant in Illinois could see 1,350 layoffs as the company struggles with rising electric vehicle production costs.
The Belvidere plant, which manufactures the Jeep Cherokee SUV, employs around 1,350 workers at the site.
Stellantis is planning to indefinitely halt operations at the plant.
The move will result in indefinite layoffs but fears are mounting that job losses will be more long-term.
The manufacturer cited the rising production cost of electric vehicles as a factor in its decision.
The company is warning that it might not resume operations at all at the plant as it considers alternative options.
The 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,” Stellantis said in a statement.
Tim Ferguson, shop chairman for United Auto Workers (UAW) union Local 1268, which represents the Illinois plant’s hourly workers, claims that production is being shifted south of the border.
Ferguson cited company documents to claim that the production of Jeep Cherokee is being shifted to Stellantis’ Toluca plant in Mexico and that the firm intends to shut down the Belvidere plant.
Amsterdam-based Stellantis insists that it is looking at repurposing the Illinois facility but did not reveal any concrete plans.
Cindy Estrada, vice president of UAW, criticized Stellantis for receiving “billions in government incentives” to transition to clean energy and yet failing to invest that money back into “our communities.”
The carmaker had earlier announced plans to invest more than 30 billion euros ($31.6 billion) through 2025 to electrify its vehicle lineup.
While the company expects EVs to make up 100 percent of its sales in Europe by the end of this decade, it only expects electric vehicles to account for 50 percent of sales in the United States.
The cost of EV production rose massively during the COVID-19 pandemic.
According to global consulting firm AlixPartners, the average cost of raw materials for an EV came in at $8,255 per vehicle in May 2022, which is up 144 percent when compared to $3,381 in March 2020.
The cost increase is driven by materials like lithium, cobalt, and nickel which are critical for manufacturing the rechargeable batteries used in EVs.
In the United States, multiple states like Georgia, Tennessee, South Carolina, and North Carolina have announced plans to incentivize EV production.
Meanwhile, electric vehicles are proving to be less reliable than their gas-powered alternatives in the United States.
The Consumer Reports 2022 Annual Auto Reliability survey, which covered 24 auto brands, found that mid-sized or large and gas-powered sedans, as well as hybrid vehicles, were the most reliable vehicles sold in the market.
Owners of electric vehicles reported multiple issues with electric motors, batteries, and charging systems.
Tesla, a market leader in EV sales, was only placed at the 19th spot in overall brand rankings.