Stellantis to close large testing facility as part of cost-cutting measures.

• CNBC has learned that automaker Stellantis plans to shut down and sell its big vehicle testing facility in Arizona by the year's end.
• The Arizona Proving Grounds, situated in Yucca, Arizona, spans 4,000 acres and is used for vehicle development and testing.
• The CEO of the trans-Atlantic automaker, Carlos Tavares, has implemented the latest cost-cutting measure.

CNBC has learned that the automaker plans to close and sell its large vehicle proving grounds in Arizona by the end of this year.

The latest cost-cutting measure by the trans-Atlantic automaker under CEO Carlos Tavares, who has been increasingly under pressure from Wall Street, dealers and the United Auto Workers union amid the company's lagging financial performance, layoffs and overall business decisions is a decision.

The Arizona Proving Grounds, located in Yucca, Arizona, covers 4,000 acres and has been used for vehicle testing and development by the automaker since it was purchased for $35 million in 2007.

According to the automaker, as of July 2019, the operations had 69 employees, including those represented by a local UAW chapter.

Three people with knowledge of the plans have confirmed the closure, but they requested anonymity due to the confidential nature of the matter.

Stellantis will utilize a proving grounds in Arizona owned by Toyota, which opened its operations for other companies to use in 2021, according to two sources.

Stellantis announced the closure on Friday morning due to ongoing cost-cutting measures and real estate evaluations.

Stellantis is committed to enhancing efficiency and minimizing its impact to maintain a competitive edge in the fast-paced global market, as stated in an email from the company.

The automaker stated that it is collaborating with the UAW to provide proving ground employees with special packages or the option to transfer their work. However, if employees are unable to find alternative employment, they may be placed on an indefinite layoff, which would guarantee them pay and benefits for two years.

Stellantis, like most automakers, has several proving grounds in different climates and geographies to develop and test vehicles ahead of selling them to consumers. One of Stellantis' major U.S. proving grounds facilities is a 4,000-acre campus located west of Detroit in Chelsea, Michigan.

During the UAW's negotiations with Stellantis last year, the company notified the union that its complex in Arizona was one of 18 facilities that could potentially be closed.

The other operations, including parts and distribution centers, were expected to be consolidated into "mega sites," along with the company's 500-acre campus in metro Detroit, which was previously used as Chrysler's world headquarters.

While the status of other properties was unclear, local and state politicians, including Michigan Gov. Gretchen Whitmer, have expressed concerns that Stellantis may shut down its former headquarters in Auburn Hills, Michigan.

In recent years, Tavares has led Stellantis in reducing the number of its U.S. employees through cost-cutting measures.

Stellantis has cut its employee count by 15.5%, or about 47,500 workers, from December 2019 to the end of 2023, with a 14.5% reduction in North America. This does not include additional layoffs and headcount reductions that occurred this year.

At the end of last year, the automaker had approximately 11,000 U.S. salaried employees, which was significantly lower compared to 53,000 employees at General Motors and 28,000 employees at Ford.

Stellantis has tried to reduce costs by outsourcing engineering tasks to countries like Brazil, India, and Mexico, according to sources.

Stellantis is currently focusing on recruiting a significant portion of its engineering staff in countries where the annual cost per employee is approximately €50,000 ($53,000) or less, which is significantly less expensive compared to similar positions in the U.S. and Europe, as reported by Bloomberg News earlier this year.