Stellantis (NYSE:STLA) is one of the top automakers in the U.S. — and one that’s looking for ways to improve its efficiency as many of its peers have done. Today’s news that Stellantis is planning to reduce its employee headcount in the U.S. further has sent shares of STLA stock down nearly 2% in early afternoon trading.
In fairness, many growth stocks are seeing significant declines today as investors price in some volatility around expected interest rate commentary from the Federal Reserve this week. But with so much macro uncertainty, it does appear that we’re likely to see increased commentary around workforce allocation in the coming quarters from some of the largest employers in the United States.
For Stellantis in particular, this announcement does come after a rather disappointing earnings report, which is likely another factor contributing to today’s decline. Let’s try to put everything together and dive into what Stellantis is looking to do — and whether these job cuts could become more widespread.
STLA Stock Lower on Expected Workforce Reduction
Today’s announcement by Stellantis that it’s looking to reduce its overall headcount isn’t necessarily surprising. Other major automakers have announced similar plans in the past. And it’s worth noting that Stellantis will first seek to eliminate positions via a broad voluntary buyout before commencing involuntary terminations, if needed.
That said, it’s clear that the forward demand projections for the automotive sector have certainly come down. As consumers are increasingly pressured by higher interest rates and inflation across the board, companies like Stellantis have had no choice but to cut prices. This downward margin pressure has meant that the company feels it has to do more with less.
In my view, the way Stellantis appears to be approaching its margin issue is relatively positive. Buying out employees where possible may reduce the burden on employees who may otherwise be adversely affected and need the job. We’ll have to see whether layoffs do take place, but for now, I think similar announcements could become more commonplace, particularly in this sector. For investors, that’s a sign of potential trouble ahead. Today’s selling pressure certainly makes sense in this regard.
On the date of publication, Chris MacDonald did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
