Heavy spending on electric vehicles that don’t make profits is forcing American automakers to slash more than their production of gas-guzzling cars. They also are cutting thousands of jobs.
Ford announced roughly 1,000 North American white-collar layoffs this week after billions of dollars in losses from its EV venture.
Ford has had even larger layoffs in the past year. General Motors and Stellantis — the parent company of Chrysler, Dodge and Jeep — have offered sizable employee buyouts. U.S. EV startup Lordstown Motors filed for bankruptcy protection this week, and German auto giant Volkswagen announced a reduction in EV production.
Automakers are facing economic challenges from electrifying their fleets as the Biden administration pushes to accelerate the EV transition. As part of President Biden’s climate change agenda, proposed EPA emissions rules would force the majority of new vehicles sold to be electric by 2032.
The White House said it is not sweating the layoffs and weak EV revenue for automakers. Mr. Biden is touting what he calls a strong economy under “Bidenomics” as he ramps up his reelection campaign.
“We’re seeing … record-low unemployment, record small-business starts, jobs that are coming back by the hundreds of thousands from overseas as part of private investment in clean energy manufacturing in our country,” White House principal deputy press secretary Olivia Dalton told reporters.
“We believe broadly we are on the right track here, that Bidenomics is having a tremendous impact, and we want to continue to see that progress move forward,” she said.
Ford announced a round of 200 contract-employee layoffs last week, 3,800 in its European departments earlier this year and 3,000 last summer in the U.S., bringing the automaker’s global number of lost jobs in the past year — largely from its EV transition — to at least 8,000.
Ford forecasts that its EV business will not be profitable until late 2026 and will be in the red by $3 billion this year, similar to its losses from EVs over the past two years.
The company’s strong profit margins from commercial and gasoline-powered vehicles, which are separate business entities from its EVs, are buoying its bottom line.
Ford received a record $9.2 billion loan last week from the Department of Energy to build three EV battery factories in Kentucky and Tennessee as part of a joint venture with a South Korean battery giant. Ford plans to pump more than $50 billion by 2026 into its global EV operations to churn out 2 million EVs annually, up from 132,000 produced last year.
The United Auto Workers responded to the loan announcement by lashing out at the Biden administration.
“Not only is the federal government not using its power to turn the tide — they’re actively funding the race to the bottom with billions in public money,” UAW President Shawn Fain said. “Why is Joe Biden’s administration facilitating this corporate greed with taxpayer money?”
Looking to slash $2 billion in “fixed costs” by the end of 2024 and phase out gas-powered vehicles by 2035, General Motors said in April that 5,000 white-collar workers had accepted buyouts.
The move will save roughly $1 billion, the company said.
Stellantis, a European conglomerate formed by the merger of the Italian Fiat Chrysler group and the French Peugeot group, offered buyouts to 33,500 of its workers in April and said it planned to slash the number of hourly workers by 3,500.
In Germany, Volkswagen said this week that it would slow the production of EVs for weeks and give employees extra time off. Roughly 300 of the 1,500 temporary workers at its factory in Emden, Germany, will not be renewed for work in August.
Ohio-based Lordstown Motors filed for Chapter 11 bankruptcy protection this week after electronics company Foxconn pulled back on a $170 million investment because Nasdaq threatened to delist Lordstown over its weak share price.
Leslie Hayward, senior vice president of public affairs at the nonpartisan Securing America’s Future Energy, said the trickle of layoffs isn’t surprising.
The former spokesperson for American EV manufacturer Rivian said years of EV technology improvements, growing consumer demand and increased political support have created a mature industry that needs to consolidate for the long term — hence the recent cost-cutting.
“There’s been a rush of industry investment that began as a trickle and became a flood, and while growth is continuing, the industry is working through their strategy to stay on top of the waves,” Ms. Hayward said.
“Manufacturers have their allocations of investment money and are focused on buckling down and ensuring they are laying the foundation for sustained growth, keeping production costs moderate, and ultimately building a stronger manufacturing foundation for the future,” she said.
Ms. Hayward said the lost jobs pale in comparison with those created by EVs in recent years. She pointed to a recent study from the Environmental Defense Fund that said EV manufacturing spurred 143,000 U.S. jobs in the past eight years.
The report said 66% of those jobs were announced since Congress enacted the Bipartisan Infrastructure Law in late 2021 and 32% since lawmakers passed the tax-and-climate spending bill last year known as the Inflation Reduction Act.
Still, billions of dollars in new tax incentives for EV buyers and companies to increase domestic production of EV batteries have been unable to stave off job cuts.
The industry expects — and is crossing its fingers — that year-over-year growth will surge.
The Alliance for Automotive Innovation said electric vehicles accounted for 8.6% of sales of new light-duty vehicles in the first quarter of 2023 in the U.S., about the same rate as the fourth quarter of last year (an 8.5% market share) and substantially up from the first quarter of 2022 (5.9%).
Those numbers equate to roughly 305,000 EVs sold in the first quarter of 2023 and a 56% increase over the same period in 2022.
• Ramsey Touchberry can be reached at rtouchberry@washingtontimes.com.
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