Traditional car companies face a difficult road ahead, Stellantis will close vehicle testing grounds in Arizona, USA

Media reports that Stellantis, the world's third-largest automaker, announced on Friday that it plans to close and sell its large vehicle testing site in Arizona, USA by the end of this year.

This decision is one of the latest cost-cutting measures taken by the company's CEO Carlos Tavares. Analysts believe that Tavares is facing increasing pressure from Wall Street, dealers, and the United Auto Workers (UAW) in the context of the company's poor financial performance, layoffs, and overall business decisions.

Stellantis confirmed the closure news on Friday morning, mentioning the ongoing cost-cutting and real estate evaluations the company is conducting.

"The company continues to seek opportunities to improve efficiency and optimize its business footprint to ensure future competitiveness in today's rapidly changing global markets."

Stellantis also stated that the company is "working with the UAW to provide special compensation packages for testing site employees, or they can choose to continue working at new operating locations."

The Arizona testing site covers 4,000 acres and has been used for automotive testing and development since Chrysler purchased the facility from Ford Motor Company for $35 million in 2007. According to Stellantis data, as of July 2019, the site employed 69 staff, including workers represented by the local UAW chapter.

At the same time, sources familiar with the decision revealed to the media that Stellantis plans to use Toyota's testing site in Arizona starting next year. Toyota opened its expensive testing facility in 2021 for use by other companies.

Most automakers, including Stellantis, have multiple testing sites in different climates and geographical locations for vehicle development and testing before launching new cars. Another major Stellantis testing facility in the US is located in Chelsea, west of Detroit, Michigan, covering 4,000 acres.

Media reports indicate that Stellantis' comprehensive testing facility in Arizona was one of the 18 facilities the company notified the union during contract negotiations last year that it might close.

The company is expected to consolidate most of its operational facilities, including parts and distribution centers, into a "super site," including the sprawling Detroit complex that was once Chrysler's global headquarters. The status of other properties is unclear, but political figures including Michigan Governor Gretchen Whitmer have expressed concerns about Stellantis potentially closing its Michigan headquarters.

Data shows that in recent years, with Tavares' cost-cutting measures, Stellantis has significantly reduced its workforce in the US.

According to public documents, Stellantis reduced its workforce by 15.5% from December 2019 to the end of 2023, to approximately 47,500 employees, with a 14.5% reduction in the North American region. This does not include further layoffs this year As of the end of last year, Stellantis had only about 11,000 white-collar employees in the United States, compared to 53,000 at General Motors and 28,000 at Ford.

Insiders told the media that Stellantis is trying to outsource many engineering jobs to low-cost countries such as Brazil, India, and Mexico, where employee costs are around €50,000 (approximately $53,000) per year or lower, much lower than similar positions in the United States and Europe. Earlier reports indicated that Stellantis has started recruiting most engineers in these countries, with employee costs also significantly lower than similar positions in the United States and Europe