(Bloomberg) -- Stellantis NV is eliminating a shift at a Jeep plant in Detroit and cutting jobs at its Toledo, Ohio, Jeep assembly complex, a move the company blamed on strict emissions standards adopted by California and more than a dozen other states in 2019.
Stellantis announced Thursday it will temporarily cut a shift at its Mack Avenue plant in Detroit, which makes two- and three-row Jeep Grand Cherokee sport utility vehicles and hybrids, and trim jobs in Toledo, which produces the Wrangler SUV and Jeep Gladiator pickup.
Stellantis said it was cutting Jeep production in anticipation of potentially lower sales of gas-powered vehicles in California and other states. The company filed a petition against California regulators Wednesday arguing the state’s rules put the company at a disadvantage versus competitors.
The moves come as automakers are pushing back on the Biden administration’s efforts to increase fuel economy and spur faster adoption of electric vehicles. Automobile industry trade groups have said stricter rules would cost them billions in fines, while dealers warn that EV demand is softening.
Stellantis’ predecessor, Fiat Chrysler Automobiles NV, sided with the Trump administration it its fight to take away California’s legal right to set its own emissions standards. That position resulted in it being left out of the less stringent deal the California Air Resources Board, or CARB, struck with four carmakers — Ford Motor Co., Volkswagen AG, Honda Motor Co. and BMW AG.
Stellantis said it would file notices Thursday to state and local governments under the federal WARN Act, which requires employers with 100 or more workers give 60 days’ notice of plant closings or mass layoffs. The company declined to specify how many jobs would be affected; the two plants combined employ just over 10,000 people.
Stellantis’s Wednesday petition alleged that California improperly adopted a 2019 deal negotiated by state regulators and four carmakers that allowed those manufacturers to voluntarily increase the average fuel economy of their fleets to about 50 miles per gallon (80 kilometers) by the end of the 2026 model year.
While Stellantis has lagged behind other automakers in the conversion to EVs, its Jeep Wrangler 4xe hybrid is the fourth best-selling electrified vehicle in California this year through September, and its Chrysler Pacifica hybrid is 13th on the list.
At the same time, all three big Detroit automakers are looking to cuts costs after they agreed to contracts with record pay increases following the United Auto Workers’ strikes this year.
Lys Mendez, communications director for CARB, said the agency expects California’s Office of Administrative Law would recognize the agreements with the carmakers “for the settlements that they are” and dismiss Stellantis’ petition. The UAW did not immediately respond to a request for comment.
Stellantis is also wrestling with shrinking sales at its prized Jeep brand as high interest rates put its premium SUV out of reach for more consumers.
Read More: Jeep’s Jump to $100,000 SUVs Risks Leaving Loyal Buyers Behind
Jeep brand sales fell 4% in the third quarter, the ninth consecutive quarterly decline, Stellantis reported in October. Sales were down 9% this year through September. Jeep named a new head of North America and picked a new global brand head last month.
The 2019 emission deal between California and the four carmakers is widely seen as a model for a subsequent Biden administration rule adopted in 2022. That rule now requires carmakers to increase their average fuel economy to about 49 miles per gallon by 2026.
Despite the fact that the national rules will require roughly the same fuel economy as California’s standards, Stellantis says manufacturers in the 2019 deal can meet the standards based on their nationwide sales, while excluded automakers are measured by sales in the states that follow the California rules. This, a company spokesperson said, necessitated the moves announced on Thursday.
(Updates with CARB response, in 10th paragraph.)
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