Chrysler lengthens summer shutdown
DETROIT – Chrysler LLC will add multiple weeks to the normal summer shutdowns for at least three pickup truck and sport utility vehicle factories and industry analysts say it’s a sign that further production cuts are looming.
The company told workers in a memo on Wednesday that the Toledo North Assembly Plant, which makes the Jeep Liberty and Dodge Nitro midsize SUVs, will be shut down for seven weeks from July 7 through the week of Aug. 18 due to sagging sales.
The Newark, Del., Assembly Plant, which makes the Dodge Durango and Chrysler Aspen SUVs, was shut down starting Monday for five weeks, with workers scheduled to return Aug. 4, and the Warren truck plant, which makes the Dodge Ram pickup, will close for five weeks in late June and July, according to union officials.
The moves likely are part of further production cuts by the No. 3 U.S.-based automaker as US$4 per gallon gas in the United States continues to send consumers away from truck-based vehicles to more fuel-efficient cars and crossovers, according to industry analysts.
Chrysler spokesman Ed Saenz would not comment Friday on further production cuts.
Most auto factories are idled for only one or two weeks during the summer as the company shifts from one model year to the next, but Chrysler and others have been forced to extend the shutdowns to keep inventories of slow-selling models under control.
“I don’t think production cuts surprise anybody anymore,” said Aaron Bragman, an analyst with the consulting company Global Insight. “These are the vehicles that are not selling.”
Chrysler’s sales were down 25 per cent in May, a month in which the whole market dropped 11 per cent when compared with May of last year. Through the first five months of the year, its sales were off 19 per cent, with huge drops in larger vehicles that make up most of Chrysler’s lineup.
For instance, Durango sales are down 44 per cent through May when compared with the same period last year. Ram sales are down 27 per cent, while Nitro sales are off 32 per cent and Liberty sales are down nearly 14 per cent.
In November, Chrysler announced it would cut 8,500 to 10,000 hourly jobs and 2,100 salaried jobs through the end of 2008, or about 15 per cent of its work force. In the past year, the company has cut shifts at seven vehicle assembly factories in Detroit; Sterling Heights; Warren; Belvidere, Ill.; Toledo, Ohio; Brampton, Ont.; and St. Louis.
But industry analysts said those cuts and earlier ones by Ford Motor Co. and General Motors Corp. may not be enough to handle the latest downturn in the market and the shift to smaller vehicles.
Michael Robinet, vice-president of global forecast services for CSM Worldwide, an auto industry consulting company, said all three are focused on controlling inventory rather than the old philosophy of cranking out unwanted vehicles and selling them with large rebates and other incentives.
“We haven’t seen the last of more inventory corrections,” Robinet said. “Vehicle manufacturers are more closely equating demand with supply. That has some obvious short-term negative effects, but the longer term is positive for the entire industry.”
Bragman and Robinet said shutting down plants for weeks at a time or running them on one shift per day is not efficient. Chrysler, they say, will have a difficult time closing plants completely because many are the only source of particular models.
Workers affected by the Chrysler cuts will get unemployment benefits and supplemental pay from the company that equals about 95 per cent of their take-home pay.
GM announced earlier this month that it would close four pickup truck and SUV factories and shift more of its efforts to smaller, more fuel efficient cars. Ford announced last month that it was cutting North American production for the rest of this year and no longer expects to return to profitability by 2009 due to the rapidly deteriorating U.S. market.