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

The Rivian news

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

“At this point in time, we believe focusing on our consumer business, as well as our existing commercial business, represent 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’ engineering and another with “second-generation” Rivian engineering.

The two companies said Monday they may still collaborate in the future.

Rivian, which is known for its electric trucks, generated huge hype when it made its public market debut in 2021. It raised roughly $12 billion in the biggest US offering since Facebook’s debut in 2012.

But worsening market conditions have hurt the loss-making company, whose shares are down 74% year-to-date.

The company is also burning through money. It ended September with $13.8 billion in cash, compared to almost $17 billion at the end of March. Over the summer, it laid off 6% of its workforce.

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Mercedes said Monday that it had signed a memorandum of understanding with the Polish government to build its first plant just for electric vans in Jawor, where it currently makes combustion engines and batteries for cars. The build-out 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 van plant,” said Mathias Geisen, head of Mercedes-Benz Vans.

Subsidies in US President Joe Biden’s Inflation Reduction Act for car manufacturers who buy US-made components, including EV batteries, are also muddying the investment outlook. Europe claims the act will make it harder for European firms to compete and could divert investment away from the bloc.

The Jeep news

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

“Our industry has been adversely affected by a multitude of factors like the ongoing Covid-19 pandemic and the global microchip shortage, but the most impactful challenge is the increasing cost related to the electrification of the automotive market,” Stellantis said in a statement. The company said it is taking steps “stabilize production” and “improve efficiency” in its North American facilities.

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The European carmaker 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 “make every effort” to place the laid off employees in open positions and is looking for other opportunities to repurpose the Belvidere factory.

The United Auto Workers International Union said on Facebook it was “deeply angered” by the decision. The group’s president Ray Curry said it is “unacceptable” Stellantis isn’t allocating new products to the plant.

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

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

In October, the company said its joint venture producing 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 European sales and 40% of its US sales to either be fully electric or plug-in hybrid vehicles within four years, CEO Carlos Tavares said.

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