Stellantis (NYSE:STLA) becomes the latest automaker to undertake cost-cutting measures due to strong competition in the electric vehicle industry and the high costs associated with the EV transition. The voluntary buyout options are being offered to nearly 33,500 U.S. employees, along with an undisclosed number of Canadian employees.
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It is worth mentioning that the offer has been given to 31,000 hourly U.S. staff and about 2,500 salaried employees, including those who have worked for the company for more than 15 years. A notification regarding packages will be sent to employees in the first week of May.
According to a letter posted earlier this week by the United Auto Workers (UAW) union, which represents Stellantis’ stamping plant in Detroit, the company aims to cut about 3,500 hourly jobs.
Factory workers who have worked for the company for a long time will receive a payment of about $50,000; however, those who have worked for the company for at least a year will receive a lump sum payment.
Importantly, the news comes before discussions between automakers, including Stellantis, General Motors (GM), Ford Motor (F), and the UAW union, that will take place later this year. The parties are likely to come to new, four-year labor agreements.
Is Stellantis a Good Buy?
The company’s decision to reduce costs is not unusual because businesses in a variety of industries have been laying off employees as a result of the difficult macroeconomic environment. On the other hand, it is encouraging to see Stellantis’ emphasis on electrification and its goal to double revenues by 2030.
Furthermore, the company has been distributing generous returns to its shareholders and has an attractive dividend yield of 7.35%. Its dividend policy seems sustainable based on its strong free cash flow generation and low payout ratio.
Overall, STLA stock has a Strong Buy consensus rating on TipRanks. This is based on 10 Buy and two Hold recommendations from Wall Street analysts. The average stock price target of $23.30 implies 44.6% upside potential. Shares have gained 20.4% so far in 2023.
