UAW workers angry that only after signing a new contract, Chrysler announces elimination of 12,000 jobs. Because private equity firms lose all sorts of sleep over guys with cushy union gigs.
Chrysler Cuts: Shock, Anger in Sterling Hts
| Last Update: 12:44 am |
DETROIT (AP) - The ink barely dry on a new four-year labor contract, Chrysler LLC says it plans to cut up to 12,000 jobs and remove four models from its lineup. The move stunned workers and suggests the now-private Chrysler won't hesitate to cut production and jettison vehicles that aren't selling well.
Chrysler said Thursday it will cut 8,500 to 10,000 hourly jobs and 2,100 salaried jobs through 2008, or about 15 percent of its work force. The cuts come on top of 13,000 Chrysler layoffs that were announced in February.
Chrysler also will eliminate shifts at five North American assembly plants and cut four models, including the slow-selling PT Cruiser convertible and Dodge Magnum wagon.
Chrysler officials said falling demand for vehicles in the U.S. market made the cuts necessary. Chrysler's sales fell 3 percent in the first nine months of this year, according to Autodata Corp., and the company said it expects sluggish sales in 2008.
"We have to move now to adjust the way our company looks and acts to reflect a smaller market," Chrysler Vice Chairman and President Tom LaSorda, who led the company through the recent contract talks, said in a statement. "That means a cost base that is right-sized and an appropriate level of plant utilization."
Most workers will be offered buyout or early retirement packages. The details of those packages weren't released Thursday. Workers also could be offered jobs at other plants. About 1,100 of the salaried workers affected are temporary workers, who don't get severance packages.
"Our union will make sure our members receive all of the benefits and protections to which they are entitled under the contract," UAW spokeswoman Christine Moroski said.
Industry analysts said the cuts were long overdue to avoid overproduction, which leads to high inventories, angry dealers and costly incentives to move cars off dealers' lots. Chrysler, which became a private company in August, is now better equipped to make those changes, since it doesn't report earnings and can afford to take a short-term hit paying for buyouts. The private equity firm Cerberus Capital Management became the majority owner of Chrysler after buying an 80.1 percent stake from Chrysler's former partner, German automaker Daimler AG.
"One of the things that private equity does is give them the discipline and the financial patience to be able to do things like this," said David Cole, chairman of the Center for Automotive Research in Ann Arbor. "It's about time. We're starting to see the kind of discipline that will build these companies into a sustainably profitable future."
Aaron Bragman, an industry analyst for the consulting firm Global Insight, said Chrysler can now make decisions in a matter of hours instead of slogging through months of trans-Atlantic debate. Bragman said Chrysler also knew it would have to wait until the contract was ratified to make cuts or else workers would have voted down the contract.
"They now have the ability to adjust production to demand, which is what the Japanese have been doing for years," he said.
As part of the new plan, shifts will be cut at vehicle assembly plants in Belvidere, Ill.; Toledo, Ohio; Brampton, Ontario; and Jefferson North and Sterling Heights in the Detroit area. Also, jobs will be cut at the company's Mack Avenue engine plant.
The announcement comes less than a week after Chrysler workers represented by the United Auto Workers union ratified a four-year contract with the automaker. The agreement passed by a slim margin after a six-hour strike. Belvidere and Jefferson North were among the plants that voted against the agreement, while the Sterling Heights plant voted for it. All of the plants except the Toledo plant are covered by the contract, which promised $15 billion in investment at U.S. plants through 2011.
Several local union presidents and workers said UAW President Ron Gettelfinger and chief UAW-Chrysler negotiator General Holiefield should have been more forthcoming about the impending cuts before members ratified the contract.
"I think we just got sold out by our leadership," said Edward Mendrysa, 56, of Southgate, who for the past 13 years has worked on the door line at the Jefferson North plant.
Several workers at Toledo's Jeep plant said company officials denied layoffs were coming and union leaders were kept in the dark even after the decision was made. Union leaders had just assured workers on Tuesday that the third shift wouldn't be eliminated.
"The next day this happens," said Skip Nearhood, a team leader on the production line.
The decision left Nearhood wondering whether Cerberus will be good for Chrysler's future.
"I thought it would be, now I'm not sure," said Nearhood, who's been at the plant 30 years and won't be losing his job.
The union said information on upcoming production changes was shared with plants. Volume-related production decisions aren't prohibited by national contracts, so the cuts likely weren't a major issue at the bargaining table.
Debbie Raper, a 52-year-old assembly line worker in Belvidere for 30 years, said she was saddened by the news and what it means for her co-workers who are nowhere near retirement age. Raper said workers have expected the cuts since the sale to Cerberus was completed.
"We all think they're here to dice and chop and sell us off," she said. "We all want to be competitive. There isn't anybody that's not conscientious about their job. But the government has to step in here at some point and help us out."
The company also said it will eliminate four products through 2008: the Dodge Magnum wagon, the convertible version of the Chrysler PT Cruiser, the Chrysler Pacifica crossover and the Chrysler Crossfire sports car.
In the same time frame, Chrysler plans to add two new products: the Dodge Journey crossover and Dodge Challenger sports car, along with two new hybrid models, the Chrysler Aspen and Dodge Durango.
"These actions reflect our new customer-driven philosophy and allow us to focus our resources on new, more profitable and appealing products," Jim Press, Chrysler's new vice chairman and president, said in a statement. "These product actions are all in response to dealer requests."
Pacifica sales were down 30 percent in the first nine months of this year as the crossover faced stiff competition from other automakers with newer models. Erich Merkle, vice president of auto industry forecasting for the consulting firm IRN Inc., said Chrysler should have refreshed the Pacifica, because it now has a big hole in its lineup in a crucial segment.
But Merkle said the cuts were necessary to get off an endless cycle of overproduction.
"They're producing more than the country is demanding," he said. "This allows them to produce with much less volatility."
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