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Stellantis Idling Jeep Plant Shows Midwest’s Struggle in EV Era

December 14, 2022

The Detroit News
Dec. 13, 2022
Breana Noble

Michigan isn’t the only state worried about missing out on the electric vehicle investment gold rush.

Stellantis NV, the maker of Jeep SUVs, will idle its assembly plant in Belvidere, Illinois, indefinitely in late February, despite it producing the Cherokee crossover, which sits in one of the hottest vehicle segments. Stellantis cites the effects of the pandemic and a global microchip shortage and emphasizes the cost of electrification in its decision. The move means 1,350 people will be laid off.

“What is at stake is our ability to have an auto manufacturer in the future,” said Clinton Morris, the mayor of Belvidere, which sits outside Rockford about an hour and a half northwest of Chicago. Morris is a former UAW member himself who has experienced the impact of layoffs. “I know the governor’s office is working regarding pursuing the future and what that may look like. It means there’s more work to be done.”

It’s a similar sentiment heard from Michigan leaders seeking to put together attractive packages to lure EV assembly, battery manufacturing and electric system component suppliers to the Great Lakes State. Michigan and the rest of the Midwest are facing increasing competition for billions of dollars in industry investment from mostly southern states like Georgia, South Carolina and Tennessee with ready-to-build land, generous incentives and low costs. Political leaders there say their states will be the mobility leaders of the future.

“Manufacturing has moved to the southern states,” said P.S. Sriraj, director of the Urban Transportation Center at the University of Illinois Chicago. “Over the last six or seven years, we’ve tried to recoup some of it, but there is no denying, manufacturing has not been the same where it was. The Midwest was the home for manufacturing. Now, it’s not.”

Illinois was an early victor in the EV race. Rivian Automotive Inc. in 2017 acquired the former Mitsubishi Motors Corp. plant in central Illinois’ Normal. At that plant, Rivian beat Detroit’s three automakers in beginning deliveries of an all-electric pickup truck last year. Rivian, however, is building a second plant in Georgia.

Workers assemble components of a Rivian electric vehicle at the company's manufacturing facility in Normal, Illinois.

Workers assemble components of a Rivian electric vehicle at the company’s manufacturing facility in Normal, Illinois. Jamie Kelter Davis, Bloomberg.

Meanwhile, the idling of Belvidere is a blow to the heritage part of Illinois’ industry. Not only does it affect the workers at the plant, but hundreds more who come from all over the region to work at suppliers, said Kevin Logan, president of UAW Local 1268 that represents about 1,100 active hourly workers at the assembly plant, another 900 waiting for recall and another 600 at suppliers.

“This is something that we feel is a punch in the gut,” Logan told The Detroit News. “We have the best workforce in the country. We’re not going to take this lying down.”

Logan said he was informed of the decision to idle the plant in a surprise phone call on Friday morning. Belvidere had been the victim of a second-shift elimination and a few layoffs since the COVID-19 pandemic and global microchip shortage, but the plant hasn’t shut down this fall, though it’s been running about half its normal speed since January. The company had said Cherokee production would last until June 9, and many hoped the plant would see investment after that.

Jeep Cherokee

Courtesy of Stellantis NV.

Bob Wagner oversees operations at three businesses in Belvidere: Wild Cherries, Countryside Fresh Market and Backstop Bar and Grill. They’ve seen the ups and downs of furloughs and shift cuts at the plant and the Kmart closing across the street, but there had been brighter signs for the community: COVID shutdowns were in the past, housing prices were rising, development was coming back and a new truck stop was going in nearby Genoa.

“It’s a nice community,” said Wagner, who noted when the plant is down, business can drop by 30%. “It’s close by the highway. It’s not too far from Chicago or the suburbs of Chicago. The cost of living, housing and taxes are almost half.

“Every time you make money and invest in your store, it seems something always comes around. It takes away our ability to do that kind of thing. We’re trying to do things that keep them in Belvidere, so you don’t have to go too far for entertainment and to keep it safe for everybody.”

Plant’s Future in Question

The Cherokee platform is one of Jeep’s oldest. Stellantis cited demand and the semiconductor shortage in its decision, but it emphasized the cost of electric vehicles in its statement about the layoffs. Carlos Tavares, the automaker’s CEO, has said EVs cost 40% to 50% more to produce than their internal combustion engine counterparts. The company also is aiming for a low break-even point to weather economic downturns. Mark Stewart, chief operating officer in North America, last week said Stellantis’ break-even in North America is less than 30% of revenues.

“With the chip supply continuing to really be a challenge in the industry, and for that point, specifically, we see that continuing through ’23,” said Stewart in Sterling Heights on Monday after a news conference about a solar energy commitment in southeast Michigan. “That’s why we took a very, very difficult decision, but to idle the plant at the end of February. We’re continuing to look at what we can do to repurpose that facility, but it’s idle, not closed.”

Mark Stewart, Chief Operating Officer of Stellantis NV in North America, speaking.

Mark Stewart, Chief Operating Officer of Stellantis NV in North America. Photo courtesy of the Detroit News.

Closing the plant would have to be a part of national negotiations with the UAW, which kick off next summer. Stewart emphasized the company will work with state and local governments to help laid-off workers find new roles. He said there are available positions in Indiana, Michigan and Ohio for those willing to transfer.

Brian Johnson has been there. He worked for the automaker in Belvidere for 11 years before getting a layoff notice in March. Because he’s 46, he opted for a transfer to Ohio’s Toledo Assembly Complex, home of the Jeep Wrangler SUV and Gladiator pickup, in July to keep his seniority instead of starting over with a new company. But his home, girlfriend, granddaughter and a future grandson due in May are in Rockford. He commutes to Toledo from Taylor in Downriver Detroit and travels home every weekend. He’s been hoping he could be recalled to Belvidere if the company retools.

“We want to know if they are going to close it or if not, if there’s no chance of coming back home, and we’re stuck in Toledo, Warren or wherever else they sent us,” Johnson said. “The plant and the people out in Toledo, they’re great. It’s just coming back home, all the driving. That’s what is the biggest issue.

“I thought I’d be called back to Belvidere after two years at the most. With that announcement, it’s a pretty big step of it being shut down for good.”

If it does close, Johnson said he’ll have to quit Stellantis and find a new job closer to home.

UAW President Ray Curry, who faces a runoff election for his job in January, said the union will advocate with local, state and federal leaders for the support needed to ensure allocation to Belvidere.

“We’re very hopeful that there could be a future product in that location, whether it’s an electric vehicle or other,” he said on Monday at an event at the Automotive Hall of Fame centered on the Battery Workforce Initiative with U.S. Energy Secretary Jennifer Granholm. “There is an opportunity for that facility to have a new product. That facility’s been there since 1965, and it’s significant to keep those members fully engaged ahead of any provisions of the ‘23 national bargaining. It’s going to be significant to get an announcement prior to that date.”

Government Response

The Illinois Department of Commerce and Economic Opportunity has deployed its rapid response team to assist workers in finding jobs and training and education resources.

“We will work collaboratively with Stellantis,” said Jordan Abudayyeh, spokesman for Illinois Gov. J.B. Pritzker, in a statement, “as the company works to identify opportunities to repurpose the Belvidere facility and looks to adapt to changes in the automotive market.”

Belvidere’s city leadership last year urged Pritzker to sign the Reimagining Electric Vehicles in Illinois Act. He did in November 2021, saying it would make the state “one of the leading EV hubs in the entire nation” by encouraging new and existing auto companies to invest in the Prairie State for EVs. It’s been billed as an enhanced version of the Economic Development for a Growing Economy tax credit, which benefitted Rivian. The REV awards are based on the amount of investment and jobs created. There also is a state income tax credit for payroll taxes, with more granted for businesses in underserved areas.

For the largest tax break, an EV manufacturer would have to invest at least $1.5 billion and create 500 new jobs over a five-year period. For context, Stellantis earlier this year retooled its Jefferson North Assembly Plant in Detroit, which produces the Jeep Grand Cherokee SUV and Dodge Durango, for the new generation of the Grand Cherokee, including a plug-in hybrid version of it. The automaker had said the project would cost $900 million and create 1,100 new jobs.

Illinois lawmakers amended the REV earlier this year to expand eligibility to include manufacturers of hydrogen fuel cell vehicles, solar-powered vehicles and electric bicycles as well as battery recycling and reuse and raw materials refining service providers. The state under separate legislation also offers customers an additional $4,000 incentive to buy EVs.

To date, one agreement has been made under the REV, which was announced in September, according to the Department of Commerce and Economic Opportunity. T/CCI Manufacturing LLC, based in Decatur, which is east of Illinois’ capital in Springfield, will invest more than $20 million to retool a plant there to manufacture electric compressors that help keep EV batteries cool and support air conditioning in a vehicle. Its REV incentive is $2.2 million to create 50 new jobs for a total of at least 150 jobs at the plant.

In Michigan, the loss of $11 billion in investments by Ford Motor Co. for EV assembly and battery manufacturing to Kentucky and Tennessee that will create 10,000 jobs spurred passage of a bipartisan $1 billion Strategic Outreach and Attraction Reserve fund a year ago. Since then, General Motors Co. has announced a battery plant with LG Energy Solution in Delta Township, LG is quadrupling its battery plant in Holland, China-based battery parts maker Gotion Inc. is investing outside of Big Rapids, and Novi startup Our Next Energy plans to build EV batteries in Van Buren Township.

Glenn Stevens Jr.In making a decision as the one Stellantis has in Belvidere, the automaker is looking at its global footprint and rationalizing its product lines to determine where to invest the $35.5 billion it has for electrification and software before 2025, said Glenn Stevens, executive director of MICHauto, the mobility arm of the Detroit Regional Chamber. Historically, Illinois has faced challenges from high business costs and taxes, high rates of workers’ compensation claims, and more regulatory restrictions, he said.

Michigan under former Gov. Rick Snyder took steps to address its business climate, Stevens said, and the SOAR project bought all of the stakeholders to the table, including energy companies. Although Michigan has the highest electricity rates in the Midwest, CMS Corp.’s Consumers Energy and DTE Energy Co. introduced economic development rates a year ago to assist with business attraction.

“It’s intensely competitive with the explosion in EV investment from a new OEM standpoint,” Stevens said. “There are many that didn’t exist before. Several have big plans like Rivian or Vinfast or companies like that. The traditional players are betting big, and the competition is intense. Michigan’s putting a really good unified foot forward that they didn’t have before.”

The Midwest is well-suited for manufacturing with its rail, roadway, air and sea port infrastructure, Sriraj said, but those assets need to be maintained and need investments to handle congestion. Community, advocacy and educational opportunities need to come together to help sway public policy and ensure that examples like Belvidere don’t create a domino effect.

Collaborative efforts in Illinois are “not at the scale at which it has to happen,” said Siraj, the University of Illinois professor who received a grant this year to examine how that state can develop a sustainable and inclusive EV supply chain. “I see a lot of these smaller initiatives. There needs to be grander, bigger efforts.”

Stellantis plans to sell 25 all-electric vehicles by 2030 in North America and has yet to announce where most of those will be built. It’s also in negotiations for a third battery plant on the continent and could add a fourth by the end of the decade; it has announced plans for battery sites in Windsor, Ontario, and Kokomo, Indiana.

“The main message I am trying to focus on: Continue to go to work, do a great job and build great vehicles like we have the past 57 years,” the UAW’s Logan said. “Show the company we are worth investing in.”