Heavy spending on electric vehicles that don’t make a profit is forcing American automakers to slash more than just their production of gas-guzzling cars: they’re also slashing thousands of jobs.
Ford became the latest domestic manufacturer this week to announce roughly 1,000 North American white-collar layoffs amid billions of dollars in losses from its EV venture.
The job cuts followed in the footsteps of numerous blows to the EV economy — even larger layoffs by Ford in the past year; sizable employee buyouts by rivals General Motors and Stellantis — the parent company of Chrysler, Dodge and Jeep; the bankruptcy filing by U.S. EV startup Lordstown Motors; and a reduction in EV production by German auto giant Volkswagen.
The economic challenges to automakers from electrifying their fleets comes amid the Biden administration’s push to accelerate the EV transition as part of his climate-change agenda, including with new proposed EPA emissions rules to force the majority of new vehicle sales to be electric by 2040.
The White House said it’s not sweating the recent layoffs and weak EV revenue for automakers, touting what it calls a strong economy under “Bidenomics” — a phrase President Biden and his allies are leaning into as his reelection campaign ramps up.
“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.
In addition to this week’s job cuts, Ford also 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 Ford’s global number of lost jobs in the past year — largely from its EV transition — to at least 8,000.
Ford forecasts 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 gas-powered vehicles, which are separate business entities from its EVs, are buoying its bottom line.
Just prior to its latest job cuts, Ford received last week a record $9.2 billion loan 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 out north of $50 billion by 2026 into its global EV operations to churn out 2 million EVs annually by that year, up from 132,000 produced last year.
The United Automobile Workers union responded to the loan, which was announced after the first round of Ford layoffs, 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?”
In its push 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 accepted buyouts.
The move will save roughly $1 billion, the company said.
That same month, 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 and said it plans to slash the number of hourly workers by 3,500.
In Germany, Volkswagen said this week that in the face of weak EV sales it would slow the production of new 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 prices.
Leslie Hayward, senior vice president of public affairs at the non-partisan clean energy think tank SAFE — Securing America’s Future Energy — said the trickle of layoffs isn’t particularly surprising.
A former spokesperson for American EV manufacturer Rivian, she said years of EV technology improvements, growing consumer demand and increased political support have created a mature industry that now 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.
She also said the lost jobs pale in comparison to those that were created by EVs in recent years, pointing to a recent study from the green advocacy group Environmental Defense Fund that EV manufacturing has spurred 143,000 U.S. jobs in the past eight years.
The report said 66% of those jobs were announced since Congress passed the Bipartisan Infrastructure Law in late 2021 and 32% since Democrats’ tax-and-climate spending law last year known as the Inflation Reduction Act (IRA).
Still, billions in new tax incentives from the IRA for EV-buyers and companies to increase domestic production of EV batteries have been unable to stave off the recent job cuts.
But the industry expects — and is crossing its fingers — that year-over-year growth will surge in the near future.
According to the trade association the Alliance for Automotive Innovation, 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 4th quarter of 2022 (an 8.5% market share) and substantially up from the 1st quarter of 2022 (5.9%).
Those numbers equate to roughly 305,000 EVs sold in the 1st quarter of 2023 and a 56% increase over the same period in 2022.
