The CEO of the maker of Jeep SUVs said if the economy and consumer demand worsen, that could be bad news for its Cherokee plant in Belvidere, Illinois, and perhaps other manufacturing facilities.
Stellantis NV last month announced it was idling indefinitely the Belvidere Assembly Plant, which makes the Jeep Cherokee, at the end of February because of supply-chain shortages and the cost of electrification. The plant employs 1,350 people, and the automaker says it's looking at alternative ways to use the facility.
"If we have a significant slowdown of the market, it's not going to help," CEO Carlos Tavares said during a roundtable following his keynote address at the CES consumer electronics show.
But Tavares was positive, saying he believes the economy will come back strong, and customers will invest in vehicles. If so, the company could "adapt" its plans for the site, he said. Ultimately, the decision around its future will be made during negotiations with the United Auto Workers that kick off this summer.
Tavares has emphasized the company is working to preserve affordability in the face of electric powertrains representing a 40% increase in the cost to make a vehicle. Deloitte's 2023 Global Automotive Study found more than half of Americans say the cost of a vehicle is their top concern. To preserve vehicles' price points, Tavares says the company has to cut from fixed, variable and distribution costs, or the size of the market could be at risk.
"If we don't optimize our cost structure, we cannot absorb the additional cost of electrification," Tavares said. "If the market shrinks, we don't need so many plants. Some unpopular decisions will have to be made. ... You go from hero to zero in three years in this industry if you stop working on costs."
The automaker can't keep around unutilized capacity for long, he added: "If you keep for a significant period of time capacity you don't use, you are in a serious amount of trouble."
Also leading to a reconsideration of its footprint is tension between Western nations and China, the world's largest auto market where Stellantis has a tiny share. Having an asset-heavy presence there is a major risk, Tavares said.
Through joint ventures, the company had been building vehicles with Dongfeng Motor Corp. and Guangzhou Automobile Group Co. Ltd. But plans to increase Stellantis' share in the JV with GAC fell apart last year. The partnership has filed for bankruptcy, and Stellantis has pulled out of Jeep production there for an "asset-light" approach.
It is in the midst of talks, as well, with Dongfeng, which makes Peugeot and Citroën vehicles: "The talks are difficult," Tavares said. "They are respectful, and they are not finished."
