The future of up to 400 former Romeo Power Inc. workers is unclear after electric truck maker Nikola Corp. said Friday it would close a practically new battery-making plant in Cypress, California, and move the work to its own assembly plant in Coolidge, Arizona.
Nikola filed a Worker Adjustment and Retraining Notification Act (WARN) notice for the plant that Romeo opened in June, a spokeswoman said. The WARN Act requires most employers with 100 or more workers to provide 60 calendar-day advance notification of planned closings and mass layoffs of employees.
Nikola purchased Romeo, which was on the verge of collapse, in an all-stock deal valued at $144 million in August. At the time, Nikola indicated it planned to keep all of Romeo’s employees.
Nikola pivots to cut costs
But a softening economy coupled with a bigger financial mess than it expected at the time of the purchase led to a pivot. Romeo, which officially became part of Nikola in October, told at least one customer, Lightning eMotors, it would not honor contracts for battery packs or maintenance.
Nikola itself has reduced truck production because of higher battery costs. Every sale of its battery-electric Class 8 Tre is a money loser. Romeo discounted every battery pack it sold Nikola — its largest customer — by $110,000. Nikola is trying to recover that cost as it takes over Romeo operations.
“This decision reinforces our commitment to finding ways to optimize our cost structure and create a sustainable business model,” Michael Lohscheller, Nikola president and CEO, said in a news release. “We remain focused on meeting our 2023 milestones, including pack and module production targets.”
All Romeo manufacturing and engineering staff, including temporary employees, remain on Nikola’s payroll. That may change when Nikola leaves the Cypress facility in the third quarter and seeks to sublease the investor-owned plant. Nikola laid off 7% or its own workforce, about 100 employees, in the fourth quarter.
Nikola plans to develop its next-generation battery management system software and modules at a separate California facility. The company has an agreement with Proterra Inc., based in Burlingame, California, for future battery packs.