French auto supplier Forvia has negotiated an exit from a contract to supply Jeeps in Michigan that has led to significant losses for the supplier.
Shedding the business will result in Forvia permanently shutting down its Highland Park, Mich., plant near Detroit and laying off 511 employees.
Forvia, whose North American base is in the Detroit suburb of in Auburn Hills, Mich., said it will wind down operations of the money-losing, just-in-time seating plant by the end of the quarter, according to an earnings report Thursday. The company settled a dispute over its contract with Stellantis to supply the Jeep Grand Wagoneer program at Warren Truck Assembly Plant.
“Operating margin should improve over the first half, mainly driven by rampup of synergies, increased benefit from inflation pass-through and confirmed resolution by the end of the third quarter of the challenges related to a seating program in Michigan,” the company said.
Stellantis declined to comment on the Forvia contract.
Contract disputes between suppliers and automakers have become prevalent in the wake of the COVID-19 pandemic and supply chain crisis that ensued. In most cases, those conflicts have been settled behind closed doors, often with a price increase to suppliers to keep the parts flowing.
That the resolution between Forvia and Stellantis resulted in scrapping the business underscores not only the extent of production woes in Highland Park, but also the automaker’s increasingly hardline approach to suppliers.
Stellantis CEO Carlos Tavares said on a call with reporters earlier this week that suppliers must work to cut costs as the automaker tries to compete against lower-priced Chinese EVs, according to a Bloomberg report. Stellantis ranked last in Plante Moran’s annual supplier sentiment survey this year, but its position did improve considerably.
The Jeep seating business is being picked up by seating competitor Lear Corp., which said in an earnings presentation in April that it won a conquest award to supply complete seats for the Wagoneer and Grand Wagoneer launching in late 2023.
The seating business caused more than $25 million in extra costs for Forvia in the first half of 2023, down from $45 million in extra costs over the same period last year, according to the company. Forvia laid off 268 in Highland Park last year after moving its metal framing division to Mexico.
UAW Local 155 Union Vice President Waymon Halty said the represented employees impacted by the recent cuts will have opportunities for work elsewhere at UAW plants in metro Detroit.
Forvia, based in Nanterre, France, ranks No. 8 on the Automotive News list of the top 100 global suppliers with worldwide sales to automakers of $26.8 billion in the 2022 fiscal year.
