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Detroit carmakers will close plants due to coronavirus concerns

Kalea Hall
The Detroit News

Detroit — In a historic but increasingly expected move, Detroit's three automakers are suspending production for the next two weeks following an outcry by rank-and-file workers concerned about the spreading coronavirus.

Fiat Chrysler Automobiles NV started to "progressively" shut down North American plants on Wednesday and will continue through the end of March. Also Wednesday, General Motors Co. began a "cadenced" wind-down of its North American operations. The suspension will last until at least March 30 and will be re-evaluated week-to-week after that. 

Cars file out of the General Motors Flint Assembly on Van Slyke road in Flint on Wednesday.

Ford Motor Co. said it will close all of its plants in North America starting Thursday evening through March 30. The company's leaders say they plan to use the downtime to determine how to best structure plant restart plans.

GM and Ford appear to be shifting some of their focus to providing relief in the fight against the coronavirus, as the two automakers said Wednesday they were looking at ways to develop equipment including ventilators. 

The automakers' decision comes after the United Auto Workers intensified its push to close plants because workers expressed increasing fear of coming into contact with the virus, and because Honda Motor Co. announced it would shut down its plants March 23. It's a move experts expected this week as automakers struggling with supply chain disruptions, disgruntled employees and declining demand across the United States.

"We are excited that they finally stood up for the membership of the UAW as a whole," said Rob Foster, 42, of Ida Township, Michigan, a Toledo Jeep employee for seven years. "We are happy they are taking our concerns seriously."

The union and Detroit Three automakers spent hours Tuesday and Wednesday debating how and whether to continue production amid the pandemic. The UAW earlier this week pushed for a two-week shutdown, but instead, the group agreed Sunday the companies would schedule rotation shifts that would partially close plants and allow for greater space between workers. 

On Wednesday, the Detroit automakers relented, driven by the realization that employees' concerns could not be ignored and that absenteeism likely would rise, slowing production.

“Today’s action is the prudent thing to do," UAW President Rory Gamble said in a statement. "By taking a shutdown and working through next steps, we protect UAW members, their families and the community.”

Automakers initially resisted stopping production because it's a costly move for automakers. Running plants below 80% capacity generally is a recipe for automakers to "hemorrhage" money, said Michael Dunne, CEO of Hong Kong-based advisory firm ZoZo Go LLC.

It's "one of the most, if not the most, capital-intensive industries in the world so you have billions of dollars invested to produce a certain number of vehicles," he said. "They are highly reluctant to stop the machinery because their fix costs are so high."

It's also likely going to cost the economy since thousands of employees will be laid off across the U.S. Employees will be compensated with a combination of unemployment and supplemental unemployment benefits, per the UAW national agreements with each automaker, according to company sources familiar with the situation.

Gov. Gretchen Whitmer and U.S. Rep. Debbie Dingell, D-Dearborn, were instrumental in bringing together the UAW/Detroit Three virus task force, the UAW's Gamble said, because of how important auto manufacturing is to Michigan's economy.

"I trust that this was the right judgment for each of the Big 3," Whitmer said during a news conference of the decision to close plants. "These people work hard, and they are the backbone of the Michigan economy."

In a statement, Dingell said she will push for Congress and the Trump Administration "to act and deliver resources and tools to address the impact of the virus now and in the future.

"There have been a lot of discussions between UAW and the companies over the last few days. In the end, this was not a difficult decision," she said. "Everyone involved knows the importance of the auto industry to the American economy and the impact of a potential shutdown."

On Wednesday, employees across multiple plants expressed concern about the spread of the virus. Ford on Wednesday temporarily closed its Michigan Assembly Plant final-assembly building in Wayne after one of the employees there tested positive.

FCA earlier Wednesday suspended production at its Sterling Heights Assembly Plant a second time in less than 12 hours after an employee there tested positive for coronavirus. UAW members there told The Detroit News they refused to work after they found out someone at the plant contracted the virus.

More than half of the day-shift FCA's Toledo Jeep employees saw the move by Sterling Heights' workers and decided to take their concerns to leadership at a safety meeting Wednesday morning.  Afterward, they returned to the line and sat down, refusing to work out of concern for their health and safety.

"We waited about 30 minutes and then they sent us home," said FCA's Foster, who wants to see FCA close down for the bare minimum of 14 days. "We stopped production. We want to be proactive."

The Detroit automakers' decision to close plants comes after Honda said Wednesday it would suspend production at its plants in North America for six days beginning Monday, with current plans to return to production on March 31. Honda has U.S. plants in Ohio, Indiana and Alabama.

The 27,600 Honda workers affected will continue to receive full pay. The company says it will use the down-time to continue deep-cleaning of its production facilities and common areas. And Hyundai Motor Manufacturing Alabama has closed its Alabama facility after a confirmed coronavirus case there. 

"From a purely logical point of view, it sort of makes sense for the safety of the workers but in addition to that the demand just won’t be there," Dunne said. "With everyone at home, who has the appetite to buy a new car?"

All three Detroit automakers have a healthy inventory with their days' supply with FCA at 75, Ford at 95 and GM at 70, and the overall industry at 69, according to Edmunds Inc. 

Experts expected the production shutdowns to happen this week given the economic impact of the virus in China and Europe. Automakers were forced to shut down facilities to help contain the virus and because of supply chain disruptions. 

Automakers "are certainly in a better position than they were in 2008," said Kristin Dziczek, vice president of industry, labor & economics at the Center for Automotive Research. "Those same pressures aren’t there that we saw in 2008 and 2009." 

Still, experts say there's no question that the shutdowns will extend to suppliers across the U.S., large and small. Said Dunne: "Suppliers will have no choice but to follow suit. That was how it played out in China. They are all connected. Once the top of the chain stops then everything else pauses."

Dziczek's concern is for the small supplier firms with 100 or more employees who could be hit hard by the production shutdown.

"They had special programs aimed at them during the bankruptcy to keep their liquidity in place and give them the capital for them to restart production," she said.

"This is beyond historic. And very, very different from what we experienced in 2008 and 2009."

khall@detroitnews.com

Twitter:@bykaleahall

Staff Writer Breana Noble contributed.