Top Three Players in Car Industry Gain Big Subsidies, But Massive Layoffs Still on the Way

Dec 27, 2023 08:57 PM EST

CONTEMPORARY NEW CARS OF MANUFACTURE IN DAYTIME — (Photo : PEXELS/Tom Fisk)

Concerns have been made about the possibility of massive layoffs at the top three companies in the auto industry, following the recent announcements by General Motors, Stellantis, and Ford to cut back on hiring plans.

Despite the anticipation of government subsidies to support these companies, taxpayers should be aware that significant job losses are likely to persist, regardless of promises made by both corporations and politicians.

The changes in the business are reflected in these layoffs. Stellantis says that strict California emissions rules are one reason for this.

Big Subsidies, Massive Layoffs Ahead

The leading trio of automotive giants in the car industry is currently benefiting from substantial financial assistance, commonly referred to as "big subsidies." These funds have become increasingly inevitable, particularly after the Biden administration's announcement of a generous $15.5 billion allocation in funding and loans aimed at facilitating the reconfiguration of manufacturing facilities for the production of electric vehicles.

According to a report by FoxBusiness, the government offers these incentives to establish and maintain high-paying automobile manufacturing jobs. It is expected that Stellantis, Ford, and GM will take advantage of most of this financial help.

Nonetheless, history has demonstrated that despite these financial windfalls, the specter of "big layoffs" remains a looming concern that cannot be disregarded. An illustrative case is that of General Motors, which recently disclosed plans to terminate over 1,300 factory workers in Michigan come January.

The focal point of these "massive layoffs" is GM's Orion Assembly plant, with the decision coming in the wake of an earlier resolution to postpone the production of two electric pickup trucks.

Interestingly, just a year earlier, Michigan Governor Gretchen Whitmer had declared a whopping $120 million "investment" in GM's Orion operations, with the promise of "creating 4,000 jobs and retaining 1,000 more." However, it is important to note that the company is set to receive these taxpayer funds, despite the ongoing issue of job losses.

As shared by The Detroit News, Stellantis NV is undergoing a restructuring in North America, resulting in the discontinuation of some contractor assignments. Although the exact number of affected contractors remains unspecified, it is a relatively minor figure compared to the massive layoffs expected at two Jeep plants in February, partly due to California emissions regulations.

Importantly, there are no big layoffs affecting Stellantis employees in connection with the conclusion of contract worker assignments.

Government Subsidy, Tax Credit

A significant component of the Inflation Reduction Act aimed to repatriate green energy and manufacturing to the United States. As shared on Top Speed, this recently endorsed law under President Biden includes the electric car tax credit. Tax incentives for electric and hybrid-electric vehicles range from $3,750 to $7,500, depending on battery production and material sources.

Starting in 2024, changes to the electric car tax credit will result in stricter requirements for battery and component sourcing. Vehicles predominantly manufactured and sourced within the United States will receive larger tax credits.

Consequently, some brands will no longer qualify for full or partial tax credits if their electric or plug-in hybrid models are entirely produced overseas, meaning shoppers will not receive tax breaks on such vehicles when filing their annual taxes in April.