Few people would argue that at this time in our world’s history, social distancing and personal hygiene are top of mind for many people. With that in mind, it seems odd that Stellantis, an Italian automaker group, would reduce the number of bathrooms and cleaning crew shifts on its factory floor. However, Autonews.com reports that Stellantis believes that the minor inconvenience fewer restrooms cause the employees may be better than cutting factory workers’ jobs.
Stellantis rolls out some unconventional cost-cutting measures
Stellantis was formed in January 2021 when Fiat-Chrysler (FCA), makers of Fiat, Chrysler, Dodge, Jeep, and Ram, merged with Peugeot Société Anonyme (PSA). Carlos Tavares, CEO of the Stellantis group, is committed to cutting annual costs by 5 billion Euros ($5.94 billion) at the Italian factory to align with its factories in France.
As part of his cost-cutting measures, Tavares has directed the reorganization of transport facilities, reducing climate control within factories, cutting the number of cleaning shifts, and reducing the availability of toilets for workers.
What drives vehicle production costs?
In an article by Automotive News Europe, industry experts speculate that direct production costs, research-and-development — amortized, tooling — amortized, building overhead — amortized, labor, energy, and other miscellaneous costs account for roughly 20 percent of the total production cost of popular, high-volume vehicles.
Lower volume vehicles such as luxury and premium models may see direct production costs as high as 35 percent. Materials and supplied parts account for the remaining 65 to 80 percent of the overall production costs.
The experts agree that amortized costs remain the same for a particular vehicle line regardless of the number of units produced. In short, 100 percent of the amortized costs are divided by the number of vehicles produced. Higher volume lines spread amortized costs among more units than lower volume lines.
Labor costs remain roughly the same whether millions of units are produced or just a few thousand. Tavares has gone on record assuring Italian labor unions that labor costs are not the main issue even though labor costs at Italian factories are more expensive than similar labor costs in France.
Why does Stellantis need to save money?
Prior to the merger in 2012, FCA invested 500 million Euros at the Italian Grugliasco plant before launching the Maserati Quattroporte in 2012 and the Maserati Ghibli in 2013. Combined production of the two lines peaked in 2014 at 36,100 units on a line designed to produce 30,000 units. By 2019, production had fallen to under 7,000 units and had slipped even farther in 2020.
Another example involves two separate factories capable of building 400,000 units each. In 1993, Melfi opened with 8,000 workers and 340 robots on the production line. Turin employed nearly 18,000 workers with virtually zero robots and achieved similar production levels in the early 1970s.
While robots and other advanced automation can reduce labor costs, the technology requires a high implementation cost. Also, any production or engineering changes require tooling and programming changes on the robots, whereas a human worker can adapt to changes much quicker and cheaper.
There are other former FCA factories that utilize robots as well. Some union officials feel that the push to build vehicles with fewer workers and more robots was a strategy to reduce union workers’ leverage for negotiating wages and benefits.
To some, it seems that closing bathrooms and reducing scheduled cleanings are yet another jab at the union workforce. Tavares and the Stellantis group remain firm on their claim that they are simply trying to find ways to reduce costs and save jobs.
Keeping a workforce employed is commendable and should not be taken lightly. It seems less than ideal to deny that workforce with basic hygienic facilities during a global pandemic caused by a virus.
EDITOR’S NOTE: Stellantis did not respond to a request for comment.