18% Staff Layoffs, Over 600 Recalls: Is Lucid Motors Still Lucid?
Lucid Group (NASDAQ: LCID) announced plans to let off hundreds of employees during an all-hands meeting on Tuesday.
Lucid CEO Peter Rawlinson informed staff that the business will lay off approximately 18% of its workforce. According to regulatory filings, Lucid employed around 7,200 people worldwide as of the end of 2022, which equates to approximately 1,290 people.
The company anticipates that the plan will be substantially completed by the end of the second quarter of 2023. It also expects to incur a total of approximately $24 million to $30 million in charges, with approximately $22 million to $28 million of it to be recognized primarily in the first quarter of 2023.
According to a memo sent to staff, Lucid will convey specifics about the layoffs over the next three days and affected employees will get a severance package that includes access to career services, continuation of healthcare coverage, and acceleration of equity.
“Earlier today, I announced the difficult decision to reduce our workforce at Lucid. Given evolving business needs and productivity improvements, we are reducing the size of our organization by approximately 18%, which will affect Lucid employees and contractors,” Rawlinson wrote.
He added that US workforce “will see reductions in nearly every organization and level, including executives.”
“We would not have the best EV on the market without the collective efforts of all of our teams, which is a direct result of your tremendous perseverance, resourcefulness, and teamwork,” Rawlinson said about moving forward. “We are committed to a more innovative and environmentally sustainable future – designing, building, and delivering the best EVs on the market as we expand globally and develop more exceptional vehicles such as the Gravity SUV, which we plan to launch in 2024.”
“I am confident that we have the most advanced technology, we have the right operational infrastructure and know-how to deliver, and we have a track record of tenacity that will make us stronger,” Rawlinson ended.
The layoffs come after Lucid issued a recall for over 600 Air sedans due to a defect that could cause the vehicles to lose power and increase the danger of a crash.
The carmaker initially filed a recall notice with the National Highway Traffic Safety Administration in February for 273 model year 2022 and 2023 Air vehicles after discovering that some electrically actuated contact switches that transfer energy to the drive motors may abruptly open, cutting off power to the electric motors. The recall has since then already been expanded to include an additional 336 vehicles that require a software update to determine whether contactor replacements are required.
“For Lucid, the safety of our customers and their families is the highest priority, and we are working to resolve this issue as quickly as is possible,” a spokesperson said in an emailed statement. “Lucid will soon begin contacting the owners of affected vehicles to notify them of the recall and to provide further information.”
Rawlinson mentioned recalls during the February earnings call but the filing with the regulatory agency didn’t reflect until recently.
“I want to be clear — we were not required by the government to do this. But we have an unwavering commitment to our customers,” he said at the time. “We were able to identify potentially impacted vehicles by sending a software update to our vehicles that allowed us to scan for a particular electrical signature within each car and thereby identify the less than 300 cars estimated to be potentially affected by this supplier issue.”
Compounding the carmaker’s problems is the dwindling reservations reflecting the production performance coming up short of guidance. As of February 2023, reservations for Lucid Air vehicles totaled more than 28,000. About six months ago, the company had more than 37,000 “soft orders.”
In 2022, Lucid had expected to produce 12,000-14,000 EVs, but only ended up getting 7,180 cars manufactured. For 2023, the carmaker guides production to 10,000 to 14,000 vehicles, way below analysts’ consensus projections of around 21,000 units.
Particularly noteworthy also was a Q4 2022 cash burn of about $940 million.
Following the recall announcement, Lucid shares dropped over 7% on the day. When the layoffs were announced, shares dipped further as much as 4% before rebounding.
The carmaker’s valuation has fallen more than 70% from a year ago, and while it has surged from its dip in January 2023, Lucid is slowly erasing those gains during the last two months.
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