Jeep maker Stellantis is laying off around 400 office jobs in the U.S. as it shifts from combustion engines to electric ones.

The formed company from the 2021 PSA Peugeot and Fiat Chrysler merger announced that the affected workers, primarily in engineering, technology, and software roles, are based at Auburn Hills, Michigan, north of Detroit headquarters and technical centers, and began receiving notifications starting Friday morning.

Layoff: A Strategic Decision Amid Automotive Sector's Challenges

Stellantis said in a statement on Friday that the company continues to make strategic decisions to improve efficiency and optimize cost structure amid ongoing challenges and increased global competition in the automotive sector. 

Effective March 31, the layoffs will account for approximately 2% of Stellantis' worldwide workforce in engineering, technology, and software roles, which, according to the statement, will receive a separation package and assistance with transitioning. While acknowledging the difficulty of the news, the company emphasized that these actions will realign resources while retaining critical skills needed to maintain their competitive advantage "as we remain laser-focused on implementing our EV product offensive."

Stellantis' Shift from Traditional to Electric-Powered Vehicles

According to CEO Carlos Tavares, electric vehicles incur about 40% higher production costs than gasoline-powered ones, necessitating the company's cost-cutting measures to ensure their affordability for the middle class.

Electric vehicle sales in the United States surged by 47% last year, reaching a historic high of 1.19 million units. The market share of EVs increased from 5.8% in 2022 to 7.6%. However, sales growth decelerated towards the end of the year, with December seeing a 34% increase.

Sector's Continued Efforts in Lowering EV Prices

Stellantis intends to introduce 18 new electric vehicles this year, with eight slated for launch in North America, marking a 60% increase in its global EV lineup. However, during earnings calls last month, Tavares emphasized to reporters that the objective is not yet achieved until electric vehicle prices reach parity with combustion engines, which Chinese manufacturers have already accomplished by leveraging lower labor costs.

Tavares told reporters that Chinese competition poses perhaps the most significant risk for companies like Tesla and Stellantis at present. He stressed the necessity of exerting considerable effort to ensure that their offerings surpass those of the Chinese competitors for consumers.

READ ALSO: GM Announces Layoffs for 1,314 Workers at Michigan Plants, Facilitating Transition to Electric Vehicles by Late 2025

Stellantis' Series of Layoffs to Streamline Operational Cost

Stellantis extended buyout and early retirement packages to approximately 6,400 non-union salaried employees last year but has not disclosed the exact number of employees who accepted these offers. 

Stellantis announced its intention to shutter a factory in Belvidere, Illinois, and lay off 1,350 employees as part of its efforts to streamline its manufacturing operations in 2022. However, amidst contentious contract negotiations with the United Auto Workers last year, Stellantis agreed to keep the plant operational for producing electric vehicles (EVs) and to establish a battery factory in Belvidere. 

Stellantis, the world's third-largest carmaker, recorded a net profit of 7.7 billion euros ($8.3 billion) in the latter half of last year, a decrease from 8.8 billion euros during the previous year.

Stellantis' workforce reductions follow similar actions taken by rivals Ford and General Motors, who have trimmed thousands of white-collar jobs due to the shift towards electric vehicles, with Ford terminating approximately 4,000 full-time and contract employees as part of cost-cutting measures during the summer of 2022, which according to CEO Jim Farley, lacked the necessary skills as the company transitioned from internal combustion engines to battery-powered vehicles. 

Last spring, approximately 5,000 salaried General Motors (GM) employees, many of whom were in engineering roles, accepted early retirement and buyout packages.

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