The young electric vehicle manufacturer is reorienting its business to focus on ramping up production.
Rivian ( (RIVN) – Get Rivian Automotive Inc. Report) is in the process of launching a major restructuring to become more “nimble” to weather a difficult period for the automotive industry and the global economy, according to an internal memo sent to employees on July 11 by chief executive officer RJ Scaringe.
This restructuring will include job cuts but Scaringe does not say how many layoffs the company is planning. On July 10, reports suggested 5% job cuts out of the 14,000 employees of Rivian, which has operations in Irvine, Palo Alto and Carson, California, Normal, Illinois, Plymouth, Michigan, Georgia and Arizona. Rivian is also present in Canada and the United Kingdom.
Scaringe should give details to employees during the traditional all-hands session on July 15, he promises in the memo. The memo was reviewed by TheStreet and confirmed by Rivian.
“As discussed in recent all hands meetings, we’ve been working to focus our business in order to stay ahead of the changing economic landscape,” the CEO wrote. “We are financially well positioned and our outlook remains strong, but to fully realize our objectives it is critical that our strategy supports our sustainable growth as we ramp towards profitability.”
He then lists the priorities of the electric vehicle manufacturer in the next 18 months: Ramping and enhancing pickup/truck R1T and SUV R1S and its electric delivery van EDV, for which Amazon is the first customer.
The company is currently increasing production rates to meet significant demand. The order book as of May 9 was over 90,000 vehicles, the company said when publishing its first-quarter results in May. This phase of increasing production rates, one of the most crucial in the life and survival of an automotive company, is taking place during a turbulent period for the entire automotive industry.
Supply chains have been deeply disrupted by the covid-19 pandemic, which penalizes suppliers. Shortages of chips and soaring prices of raw materials such as nickel, palladium, and cobalt add to the challenges of assembling cars. All of these hurdles only drive up costs, further widening the losses for young automakers like Rivian.
“Supply chain continues to be the bottleneck of our production. This challenge has continued across a small handful of technical components such as semiconductors, as well as a few non-semiconductor components,” Rivian wrote in a letter to its shareholders in May.
The net loss was $1.6 billion in the first quarter compared to a loss of $414 million for the same period in 2021. The company said that it had $17 billion in cash as of March 31, and assured that this money will be enough to cover its spending through the launch of its next model, a lower-cost vehicle called R2, at a planned new factory in Georgia in 2025.
Rivian Freezes Non-Manufacturing Hiring
Scaringe said in the memo that accelerating the development of this lower-cost vehicle, continuing to ramp the company’s go-to-market capabilities, including its charging and service infrastructure, optimizing costs and operating expenses across the business are also priorities.
“As a result, we’ve implemented changes across Rivian, including prioritizing certain programs (and stopping some), halting certain non-manufacturing hiring and adopting major cost down efforts to reduce material spend and operating expenses,” Scaringe said.
He added that: “We also began the process of aligning the organization as a whole to ensure we are as focused, nimble and efficient as possible to achieve our priorities and objectives.”
The CEO promises that the company will be “thoughtful” in its cost reductions. But he warns that Rivian is not “immune” to the current downturn and must “make sure we can grow sustainably.”
“Every decision about our team is being assessed through the lens of our strategic priorities, not as a mechanism to simply reduce costs. Our team will continue to grow in support of our production ramp and product roadmap,” Scaringe writes.
The company recently delivered good news to investors: Rivian announced on July 6 that it produced 4,401 vehicles at its manufacturing facility in Normal, Illinois during the second quarter that ended on June 30, up 72.4% from the previous quarter.
“These figures remain in line with the company’s expectations, and it believes it is on track to deliver on the 25,000 annual production guidance previously provided,” the carmaker said at the time.
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