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2,000 contract workers let go at Fiat Chrysler as automakers hunker down

Breana Noble Kalea Hall
The Detroit News

Almost 2,000 contract workers across North America at Fiat Chrysler Automobiles will be out of a job as projects are paused, another indication of the pressure the auto industry is under amid the coronavirus pandemic.

General Motors Co. and Ford Motor Co., meanwhile, are borrowing billions from existing credit facilities to ensure financial flexibility as Ford extends plant shutdowns in North America, and signs indicate its crosstown rivals are preparing to do the same, too. And dealers are shuttering their doors as states order workers — and customers — to stay home.

Fiat Chrysler will cut the pay of salaried workers by 20% for up to three months as the  automaker works to save cash as sales and factories grind to a halt because of the coronavirus pandemic.

"It's very difficult from this point to see jobs popping right back in two months or three months," said Sam Fiorani, vice president of global vehicle forecasting at AutoForecast Solutions in Pennsylvania. "Even with the stimulus proposed, and you're given money, are you going to spend that on a car? Or are you going to put that away until you get a job?"

Ford already has extended its manufacturing downtime beyond Monday as originally planned as states institute stay-at-home orders, decreasing demand for vehicles. GM is likely to do so, as well, having said its plants will remain shut down until "at least" Monday.

GM workers were privately informed on social media by United Auto Workers Local 1853 in Spring Hill, Tenn., that they should file for unemployment until May 1. Employees at GM plants in Bowling Green, Kentucky, and at its Bedford Castings Operations in Indiana were given return-to-work dates of April 14.

Some states require a date to be put on temporary layoff forms for unemployment, GM said in a statement. But right now, the company doesn’t have firm return-to-work dates, a symptom of the virus-induced uncertainty weighing on automakers, their suppliers, dealers and other sectors of the economy.

Fiat Chrysler's plants are down through the end of March, though UAW President Rory Gamble on Tuesday in a letter to members said the automaker intends to extend the downtime. Fiat Chrysler has not commented on the possibility. A third UAW-FCA employee, this time from Warren Truck Plant, died Wednesday, Gamble said in another letter.

Parts distribution centers remain open with a paid voluntary workforce. Fiat Chrysler on Wednesday closed down one in Center Line, however, after an employee there tested positive for COVID-19, Gamble said. The company is deep-cleaning the facility.

Foreign rivals operating in the United States are prolonging shutdowns, too. Subaru Corp.'s Indiana plant is closed through April 6. Honda Motor Co. Ltd. on Thursday closes its power equipment and all-terrain vehicle plants in North and South Carolina respectively until April 6, though its 10 auto plants are expected to restart on Tuesday. Toyota Motor Co.'s North American facilities are expected to resume operations April 6, and so will Nissan Motor Co.'s four plants in Mississippi and Tennessee.

Analysts at Edmunds.com Inc. on Wednesday forecast a seasonally adjusted annual rate of 11.9 million vehicles sold for the year in the United States, a 30% year-over-year decline. It is the lowest forecast since June 2011, said Jessica Caldwell, executive director of industry insights at Edmunds.

"Across all industries you're seeing people taking pay cuts, reducing hours, layoffs, that's pretty standard where we are right now in terms of companies trying to put their head around what's going on," Caldwell said. "How long this downturn is going to last, nobody really knows. Companies are making tough choices that they obviously don't want to make. It's beyond the point of feeling comfortable about it."

Fiat Chrysler told 2,000 of nearly 3,000 supplemental contract workers, who are not union-represented, in the United States, Canada and Mexico on Tuesday that it was putting some programs on hiatus as it conserves funds amid the suspended production.

"In light of the challenges created by the COVID-19 situation, and the various ‘stay at home’ orders from multiple states, a number of development projects within FCA have been temporarily put on hold," the automaker said in a statement.

"As a result of this, subcontract companies who were providing external support to a number of these projects have been asked to temporarily suspend their activities as we reprioritize certain initiatives and projects."

The company added it will continue to monitor the situation in hopes of returning to normal as soon as possible. The automaker did not provide details on which projects it is suspending. Moody's Investors Services has placed FCA's non-investment grade credit rating under review "with direction uncertain." FCA shares on Wednesday closed up 6%.

It is no surprise that automakers are putting programs on hiatus given the circumstance, and there is likely more to come, says Jeff Schuster, president of global vehicles forecasting at LMC Automotive.

"Everything is on the table right now," Schuster said. "Companies are maximizing margin and revenues to essentially rebuild the companies and the industry. At least in the interim, you'll see quite a shift in prioritization."

Fiat Chrysler also paused construction work at its new assembly plant on Detroit's east side and Warren Truck Plant that will build large Jeep SUVs, including the next-generation Grand Cherokee, Wagoneer and Grand Wagoneer, and a full-size, three-row model. The automaker has not said if this will affect the vehicles' launch dates.

Meanwhile, GM on Tuesday said it was borrowing $16 billion from revolving credit facilities after Ford last week took out a loan for $15.4 billion of total unused funds against two lines of credit and suspended its 15-cent quarterly dividend. Fitch Ratings then downgraded Ford to one notch above non-investment grade over concerns of a prolonged shutdown.

But the additional cash plus several years of strong profits position the companies to persist through the sudden challenges.

"Ford did a great job back in the Great Recession of being prepared and having money ready to go," Fiorani said. "The other automakers being may have learned from Ford's plan."

The effects of the shutdowns are being felt upstream, too. Kirchoff Automotive has laid off temporarily 338 employees in Tecumseh where it makes grille opening reinforcements for GM and cross-car beams for Ford, according to a notice filed with the state of Michigan. International Automotive Components, which makes interior vehicle components and systems, has laid off temporarily 311 workers in Mendon and 77 in Alma as well as 197 permanently in Ohio.

Additionally, thermal system supplier Denso Corp. says it is complying with stay-at-home orders in Michigan and other states. Both of the company's manufacturing  operations in Battle Creek have a production stoppage this week, the company told The News. Some parts of the business are required to continue operating, and Denso will reevaluate operations to assess risk and customer demand before it resumes production.

And Detroit-based American Axle & Manufacturing Holdings Inc. on Tuesday closed its facility in Fraser after a worker tested positive for the virus, the company said. The employee is in quarantine and had not been in the facility since March 12. Because of Gov. Gretchen Whitmer's stay-at-home order, American Axle also suspended operations at several other locations.

"We'll come out on the other end," Schuster said. "What tends to happen during periods like this is you see a boost in innovation because companies are looking at what they have to do survive and flourish. You'll likely see quite a bit of that come out of this."

bnoble@detroitnews.com

Twitter: @BreanaCNoble