Stellantis to shutter and sell proving grounds amid cost-cutting

DETROIT — Automaker Stellantis plans to shutter and sell its large vehicle proving grounds in Arizona at the end of this year, CNBC has learned.

The decision is the latest cost-cutting measure by the trans-Atlantic automaker under CEO Carlos Tavares, who has been increasingly under pressure from Wall Street, dealers and the United Auto Workers union amid the company’s lagging financial performance, layoffs and overall business decisions.

The Arizona Proving Grounds covers 4,000 acres between Phoenix and Las Vegas in Yucca, Arizona. It has been used for vehicle testing and development for the automaker since then-Chrysler purchased the property for $35 million from Ford Motor in 2007.

As of July 2019, the operations employed 69 people, including workers represented by a local chapter of the UAW, according to the automaker.

The closure was confirmed by three people familiar with the plans who agreed to speak on the condition of anonymity because the matters are private.

Stellantis plans to use a proving grounds in Arizona owned by Toyota Motor beginning next year, according to two people familiar with the decision. Toyota opened its operations, which are costly to maintain, for other companies to use in 2021.

Stellantis confirmed the closure Friday morning, citing the company’s ongoing cost-cutting and real estate evaluations.

“Stellantis continues to look for opportunities to improve efficiency and optimize its footprint to ensure future competitiveness in today’s rapidly changing global market,” the company said in an emailed statement.

The automaker also said it is “working with the UAW to offer proving ground employees special packages or they can choose to follow their work in a transfer of operations” but that employees could be placed on an “indefinite layoff, which would entitle them to pay and benefits for two years.”

Stellantis, like most automakers, has several proving grounds in different climates and geographies to develop and test vehicles ahead of selling them to consumers. Stellantis’ other major U.S. proving grounds facility is a 4,000-acre campus located west of Detroit in Chelsea, Michigan.

Stellantis’ complex in Arizona was one of 18 facilities the company notified the UAW it could potentially close during the union’s contract negotiations last year with Stellantis.

A majority of the other operations were parts and distribution centers that were expected to be consolidated into “mega sites,” as well as the company’s massive 500-acre campus in metro Detroit formerly used as Chrysler’s world headquarters.

The status of the other properties was not immediately clear, however, local and state politicians, including Michigan Gov. Gretchen Whitmer, have expressed concerns that Stellantis could move to shutter the former headquarters in Auburn Hills, Michigan.

Stellantis has significantly reduced the number of its U.S. employees in recent years amid Tavares’ cost-cutting measures.

Stellantis has reduced employee head count by 15.5%, or roughly 47,500 employees, between December 2019 and the end of 2023, including a 14.5% reduction in North America, according to public filings. That doesn’t include further head count reductions and layoffs this year.

The automaker had only about 11,000 U.S. salaried employees at the end of last year. That compared with 53,000 at General Motors and 28,000 at Ford.

The reductions have occurred as Stellantis has attempted to outsource many engineering efforts to lower-cost countries such as Brazil, India and Mexico, according to several people familiar with the moves.

Bloomberg News earlier this year reported that Stellantis moved to recruiting a majority of its engineering workforce in those countries, where the cost per employee amounts to roughly €50,000 ($53,000) or less per year — far less than similar positions in the U.S. and Europe.