American automaker Rivian is once again reducing its workforce by 6%, based on the company’s internal memo from CEO RJ Scaringe. The scoop originated from Reuters, which first had access to the leaked memo sent to Rivian employees on February 2.
Intriguingly, the internal memo occurred six months after Rivian’s first job layoffs of about 6% or 14,000 employees in July. It is also worth noting that Rivian’s job layoffs coincide with a decline in EV costs that was triggered by recent price cuts made by leading automakers Tesla and Ford.
About the memo
CEO RJ Scaringe noted in the memo that employees working in EV production at Rivian’s Illinois factory would not be affected by the job cuts. Instead, it will terminate around 840 out of its 14,000 employees.
He further noted that the automaker would focus its resources on R1 trucks and EDV delivery vans production for its major client, Amazon. Apart from that, it will also prioritize the debut of its new R2 platform.
“To deliver over the long-term, we must focus our resources on the ramp and our path to profitability while ensuring we have the right set of future products, services and technology that will continue to challenge convention.
In 2022, we took steps to focus our product portfolio and drive a lower cost structure. Continuing to improve our operating efficiency on our path to profitability is a core objective and requires us to concentrate our investments and resources on the highest impact parts of our business. This includes the continued ramp of R1 and EDV production as well [as] the launch of our high-volume R2 platform. The changes we are announcing today reflect this focused roadmap.”
CEO RJ Scaringe (via memo)
Why are the job cuts necessary?
Rivian is affected by the ongoing price war
Rivian was pressured to implement additional job layoffs as it gears up for an industry-wide electric vehicle price war. The automaker is currently struggling with declining financial reserves and a sluggish economy, which forces it to reduce operations expenses by cutting its workforce.
Rivian’s shares had dropped over 90% from its November 2021 high when it had a successful initial public offering. Following the news of the layoffs, Rivian’s stock was trading at a drop of 4% on the Nasdaq on Wednesday.
That said, Rivian decided to concentrate its resources on increasing EV production to gain profit, which was explained in CEO RJ Scaringe’s internal email to employees.
The move is expected to reduce the automaker’s operational costs during the stagnating economy and pressure from the ongoing price wars.
Rivian is “bleeding cash”
The COVID-19 outbreak produced supply-chain problems that caused Rivian to barely miss its full-year production estimate of 25,000 EVs in 2022. It had already cut that target in half.
Rivian has also abandoned its partnership with Mercedes-Benz for the European delivery vans to conserve its resources.
“They’re bleeding cash and would like to grow at a much faster rate, but they continue to struggle with their EV production ramp and have been unable to meaningfully drive down unit costs. We think that is what’s behind this decision.”
CFRA Research analyst Garrett Nelson
Rivian’s current market value is worth $17.8 billion. Meanwhile, its cash and cash equivalents dropped to $13.27 billion as of September 30, 2022, from approximately $18 billion the previous year.
