Auto industry bad news: Rivian drops Mercedes deal; Jeep facility to close

By Julia Horowitz, CNN

Rivian said Monday it would no longer pursue a deal with Mercedes to build electric vans for businesses in Europe. It’s the second piece of bad news for the auto industry this weekend. Jeep’s parent company previously announced that a Jeep plant in Illinois will close in February.

Rivian news

In a statement, Rivian CEO RJ Scaringe said the company needed to be strategic about its investments.

“At this time, we believe that focusing on our consumer business, as well as our existing commercial business, represents the most attractive near-term opportunities to maximize value for Rivian,” Scaringe said.

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A memorandum between Rivian and Mercedes was agreed just three months ago. They had planned to produce two large vans – one based on Mercedes technology and another with “second generation” Rivian engineering.

The two companies said on Monday that they may still work together in the future.

Rivian, known for its electric trucks, created huge hype when it made its public market debut in 2021. It raised about $12 billion in the largest U.S. offering since Facebook’s 2012 debut.

But deteriorating market conditions have hurt the loss-making company, whose shares have fallen 74% year-to-date.

The company is also burning money. It ended September with $13.8 billion in cash, compared with nearly $17 billion at the end of March. During the summer, they laid off 6% of their workforce.

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Mercedes said on Monday it had signed a memorandum of understanding with the Polish government to build its first all-electric van plant in Jawor, where it currently makes internal combustion engines and batteries for cars. The expansion would not be affected by Rivian’s decision to withdraw from their deal, according to the company.

“We will continue with full speed and determination to scale up electric vehicle production in our first dedicated electric car factory,” said Mathias Geisen, head of Mercedes-Benz Vans.

Subsidies in U.S. President Joe Biden’s Inflation Reduction Act for automakers that buy U.S.-made components, including EV batteries, also cloud the investment outlook. Europe argues the law will make it harder for European companies to compete and could drive investment away from the bloc.

The Jeep news

Stellantis is closing its Illinois plant in February, resulting in indefinite layoffs for 1,350 employees, the company said in a statement, citing rising costs in the electric vehicle market.

“Our industry has been adversely affected by a number of factors such as the ongoing Covid-19 pandemic and the global shortage of microchips, but the biggest challenge is the rising costs of the electrification of the automotive market,” Stellantis said in a statement. The company said it is taking steps to “stabilize production” and “improve efficiency” at its North American facilities.

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The European automaker said it will “idle the assembly plant in Belvidere, Illinois” on February 23 and said the layoffs are expected to exceed six months. Stellantis, the parent company of Chrysler, Dodge and Jeep, said it will “do everything possible” to place the laid-off employees in open positions and is looking for other opportunities to repurpose the Belvidere plant.

The United Auto Workers International Union said on Facebook it was “deeply upset” by the decision. Group president Ray Curry said it was “unacceptable” that Stellantis was not allocating new products to the plant.

The Illinois plant builds the Jeep Cherokee and will continue to make the vehicle until the plant closes, but the company had no comment on the future of that make and model.

“This is an important vehicle in the lineup, and we remain committed to this midsize SUV segment for the long term,” Stellantis spokeswoman Jodi Tinson said in a statement.

In October, the company said its joint venture that makes Jeep vehicles in China is filing for bankruptcy.

Last July, Stellantis made a $35.5 billion commitment to electric vehicles by the end of 2025 to expand its portfolio. The company planned for 70% of its sales in Europe and 40% of its sales in the U.S. to be either all-electric or plug-in hybrid vehicles within four years, CEO Carlos Tavares said.

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