Stellantis to sell, close large testing facility amid cost-cutting efforts

Detroit – Automaker stellar It plans to close and sell its large vehicle proving grounds in Arizona later 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 under pressure from Wall Street, dealers and the United Auto Workers union amid the company's lagging financial performance, layoffs and overall business decisions.

Arizona Proving Grounds covers 4,000 acres between Phoenix and Las Vegas in Yucca, Arizona. Since Chrysler purchased the property for $35 million, it has been used for vehicle testing and development for the automaker. 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 closing was confirmed by three people familiar with the plan who agreed to speak on condition of anonymity because the matters are private.

Stellantis plans to use a proven base in proprietary Arizona Toyota Motor starting next year, according to two people familiar with the decision. Toyota launched its operations in 2021 for use by other companies, which are expensive to maintain.

Stellantis confirmed the closing Friday morning, citing the company's ongoing cost-cutting and real estate evaluation.

“Stellantis continues to seek 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 special packages to certified ground workers or they may choose to pursue their jobs in the transfer of operations” but that the workers may be placed on an “indefinite layoff, which will entitle them to pay. And two benefits for the year.”

Stellantis, like most automakers, has several proven bases for developing and testing vehicles before selling them to consumers in different climates and geographies. Stellantis' other major US authentication ground 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 union contract negotiations with Stellantis last year.

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

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

Stellantis has significantly reduced its U.S. workforce in recent years amid Tavares' cost-cutting measures.

Stellantis cut 15.5%, or about 47,500 employees, between December 2019 and the end of 2023, including a 14.5% reduction in North America, according to public filings. This does not include further headcount reductions and layoffs this year.

The automaker had about 11,000 U.S. salaried employees at the end of last year. 53,000 as compared to that General Motors and 28,000 in Ford.

The decline comes as Stellantis tries to outsource many engineering efforts to low-cost countries such as Brazil, India and Mexico, according to several people familiar with the move.

Bloomberg News reported earlier this year that Stellantis has moved to hire most of its engineering staff in those countries, where costs per worker are around €50,000 ($53,000) or less per year — much lower than similar locations in the United States and Europe.