Stellantis Set To Build More Ram Trucks In Mexico, Potentially Escalating UAW Dispute: Report

In a move that could further strain its relationship with the United Auto Workers (UAW,) Stellantis NV (NYSE:STLA) is planning to expand its production of Ram trucks in Mexico.

What Happened: The automotive giant, which also owns Jeep, Dodge, and Chrysler, is set to expand its factory complex in northern Mexico to manufacture Ram 1500 pickup trucks, reported The Wall Street Journal on Tuesday, citing people familiar with the matter.

This move could potentially exacerbate the already strained relationship between the company and the UAW.

The company has been producing most of its light-duty Ram pickups at a factory near Detroit in recent years. Despite the expansion in Mexico, Stellantis stated that the Ram trucks would continue to be made at its Sterling Heights assembly plant north of Detroit.

The company also disclosed plans to invest $235 million at the Michigan factory to build future electric versions of the pickup.

These plans come on the heels of a landmark labor agreement Stellantis signed with the UAW about a year ago, which promised billions in U.S.-based investment and a substantial pay hike for union members. The move to Mexico could potentially increase labor costs for Stellantis and its competitors, prompting them to shift some factory work outside the U.S., according to the report.

"There's fear across the board," said Kevin Gotinsky, UAW's lead bargainer for Stellantis, at a recent union rally in suburban Detroit. "The shift is everything out of this country."

Stellantis did not immediately respond to Benzinga’s request for comment.

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Why It Matters: The decision to expand production in Mexico comes amid several challenges faced by Stellantis. Recently, the company has been dealing with downward pricing pressure and inventory issues, leading to a stock downgrade by RBC Capital analyst Tom Narayan. The analyst noted that resolving inventory issues without sacrificing prices could help margins rebound.

Moreover, Stellantis has been grappling with a recall of over 129,000 Ram 1500 trucks due to a malfunctioning turn signal feature, increasing the risk of accidents. This recall adds to the company’s challenges as it seeks to maintain its market position.

Additionally, Stellantis reported a 20% decline in U.S. sales in the third quarter of 2024, further complicating its financial landscape. The company has also been struggling in the European electric vehicle market, with its stock down significantly over the past year, as highlighted by the halt in Fiat 500e production due to weak demand.

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Stellantis Ram 1500 truck | Photo courtesy: Stellantis

This story was generated using Benzinga Neuro and edited by Kaustubh Bagalkote