FCA indefinitely laying off 1,420 Detroit-area workers
Changing consumer preference from cars to SUVs and trucks is largely to blame for a shift being cut at the Sterling Heights Assembly plant.
About 1,420 production workers face indefinite layoffs at the facility and a supporting stamping plant that build the Chrysler 200 mid-size sedan.
Fiat Chrysler Automobiles NV informed the United Auto Workers as well as city and state officials of the layoffs Wednesday afternoon. The indefinite layoffs will begin July 5. About 1,900 employees will remain working on one shift at the assembly plant.
The decision comes after months of temporary layoffs due to a lack of demand for Chrysler’s midsize sedan, the facility’s only vehicle. In a crowded market segment with declining demand, the lackluster Chrysler 200 never caught on and will be discontinued. Fiat Chrysler said the shift cut is “to better align production with demand.”
Production of the Chrysler 200 at Sterling Heights Assembly stopped on Feb. 1 and the plant’s 3,000-plus employees were placed on temporary layoffs. Production was scheduled to resume at the 5-million-square-foot assembly plant this week, but a company spokeswoman on Wednesday said that was pushed back to next week.
Indefinitely laid-off employees, including 120 at Sterling Stamping, will be placed in open full-time positions in other plants “as they become available within the Detroit labor market based on seniority,” the company said.
The layoffs are “a direct result of shifting demand toward trucks and SUVs,” Fiat Chrysler said in a statement.
“Our truck and SUV plants are running six days a week about 20 hours a day,” the company said. “And while 1,300 people will be impacted by layoffs (at Sterling Heights Assembly), we have been able to add 11,000 hourly jobs in Michigan since 2009 to keep up with that demand.”
UAW Vice President Norwood Jewell, who heads the union’s Fiat Chrysler department, said while the shift cut is “unfortunate, it is not unexpected.”
“FCA is not the only company experiencing a slow market for small cars,” he said in a statement. “On a bright note, there is a strong demand for larger-sized vehicles. The company has been planning to increase its capacity to build more trucks and SUVs.”
“I believe that in the long term this move will be a positive one for our members and the company.”
Union employees under the UAW’s contract with the automaker are paid on average about 95 percent of their after-tax pay while laid off, including state unemployment benefits. That ends up being 70-75 percent of their gross pay, according to Art Schwartz, a former longtime negotiator with General Motors Co. and president of the Labor and Economics Associates consultancy firm.
A spokesman for the UAW was unable to immediately provide additional details on pay and benefits for the laid-off employees.
The contract also states that employees placed on indefinite layoff can be offered out-of-market jobs (greater than 50 miles). If they accept, they will receive up to $50,000 as a relocation allowance, $10,000 of which will be provided “as a signing bonus to cover miscellaneous up-front cash expenditures.”
If they decline, the employee is placed on “inactive status” with no company-provided income or benefits but remain “eligible for additional job opportunities,” according to the contract.
Neither UAW Local 1700 President Charles Bell or UAW Local 1268 President LaShawn English, both of whom represent production workers at the two Sterling Heights facilities, immediately responded for comment.
The layoffs come 10 weeks after Fiat Chrysler CEO Sergio Marchionne outlined a business plan that included ceasing production of the Chrysler 200 and the Dodge Dart compact sedan to free up space in U.S. plants for hot-selling, more profitable Ram pickups and Jeep SUVs.
Chrysler 200 sales through the first three months of the year in the United States were down 63.4 percent compared to the same time period in 2014. Fewer than 18,000 cars sold.
Karl Brauer, Kelley Blue Book senior analyst, said the Chrysler 200 — which was completely redesigned in 2014 — is outclassed: “A couple years ago it likely could have chipped away the segment leaders’ market share. In 2016, there are simply too many other compelling options, both within and outside the midsize sedan segment, for a car like the 200 to grow or even maintain its volume.”
Sales of the Dodge Dart also have been problematic: It’s taken a 32.8 percent dive so far this year. However, the 4,000-plus workers at Belvidere Assembly in Illinois have not been been as negatively affected because that plant also produces the Jeep Patriot and outgoing Jeep Compass. Sales of those sport utilities are up 42.8 percent and down 3.2 percent this year, respectively.
Marchionne said the plan to cease production of the cars was due to a “permanent shift” in consumer preference from cars to crossovers and sport utility vehicles. The company plans to use freed-up plant capacity to build more hot-selling Ram Truck pickups and Jeeps.
Last year marked the fifth time in six years that light-duty trucks, including some SUVs and crossovers, outsold cars. Trucks accounted for 55.7 percent, or 9.7 million, of vehicles sold last year, up more than 1.1 million from 2014. That’s the segment’s highest percentage since 2004, according to Autodata Corp.
Marchionne said the company was continuing discussions with potential partners that could “provide a product from their facilities” to allow the company to cover gaps in the lineup left by the Dart and 200.
Prior to Marchionne’s comments on ceasing production, there were media reports during contract discussions with the UAW last year that the company planned to move production of the 200 and Dart to Mexico. But the company never confirmed those plans.
Moving the production to Mexico wouldn’t have been unprecedented. Several automakers, including crosstown rival Ford Motor Co., have announced significant investments in Mexico. Ford on Tuesday confirmed plans to build a $1.6 billion assembly plant in Mexico for small-car production.
The Sterling Heights shift cut is the latest twist for workers at the plant. The plant was scheduled to be shuttered during Chrysler’s 2009 bankruptcy. The reborn company eventually changed its plans and invested more than $1 billion to renovate the facility, including new paint and body shops, for production of the 200.
Fiat Chrysler Automobiles NV on Wednesday announced a $500 million investment in Argentina for production of a new vehicle for the Latin American market.
The plant is scheduled to launch production in the second half of 2017 and will produce more than 100,000 vehicles a year, according to the automaker.
“This plant will operate using the most advanced technologies available to FCA today,” said FCA CEO Sergio Marchionne in a statement. “This choice demonstrates a major strategic change, giving the Córdoba plant a central role in FCA’s industrial activities in Latin America.”
The investment, Fiat Chrysler says, includes retooling the facility, installation of more than 150 robots in the body shop, supplier development, training and research and development. The company did not say what vehicle will be built at the plant.