Automaker says shift from cars to SUVs is to blame
About 1,420 FCA workers face indefinite layoffs at the automaker’s Sterling Heights assembly plant in the Detroit area. The Detroit News reports that the plant, which makes the slow-selling Chrysler 200 sedan, and a supporting stamping plant will lay off 1,420 workers indefinitely. A shift has been cut at the plant due to consumer preferences swinging toward SUVs and trucks, according to FCA.
FCA informed the United Auto Workers and city and state officials of the layoffs on Wednesday. The indefinite layoffs will start on July 5 while 1,900 employees will continue working a single shift at the assembly plant. Due to lack of demand and a crowded segment, the current-generation Chrysler 200 never caught on and will be discontinued along with the Dodge Dart compact sedan. FCA originally announced temporary layoffs at the Sterling Heights assembly plant due to the lack of demand for the Chrysler 200, which was the only model built there. Production at the Sterling Heights assembly plant was supposed to resume this week but FCA has revealed that it has rescheduled it to next week.
FCA confirmed the layoffs to us in an email. Employees that are indefinitely laid off will be placed in other full-time positions at other FCA plants “as they become available within the Detroit labor market,” with the appointments to be based on seniority, the automaker said in a statement. FCA also said that the shift in demand to SUVs and trucks is the reason for the layoffs. “Our truck and SUV plants are running six days a week about 20 hours a day,” the company said to The Detroit News. “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 also heads the union’s FCA department said that the shift cut was “not unexpected,” stating that “FCA is not the only company experiencing a slow market for small cars.” However, he believes the strong demand for trucks and SUVs, and the planned increase in capacity for building more of them will benefit UAW members and FCA.
Union employees under the UAW’s contract with FCA are paid about 95 percent of their after-tax salary while they are laid off, which also includes state unemployment benefits. Those on indefinite layoff can also be offered out-of-market jobs and will receive an allowance of up to $50,000 USD for relocation, with $10,000 USD of that being provided “as a signing bonus to cover miscellaneous up-front cash expenditures.” Employees that decline are placed on inactive status and don’t receive company-provided income but are still eligible for “additional job opportunities,” according to the contract.
The layoffs come more than two months after FCA CEO Sergio Marchionne revealed a new business plan that included the discontinuation of the Chrysler 200 and Dodge Dart in favor of more trucks and SUVs for the Ram and Jeep brands, which are more profitable. However, Marchionne said that FCA was in discussions with potential partners that will allow them to contract the manufacturing of small cars to another automaker.
Sales of the Chrysler 200 were down 63.4 percent for the first three months of this year with less than 18,000 examples sold. The Dodge Dart, on the other hand, is down 32.8 percent this year but the Belividere, Ill., plant that makes the car hasn’t been impacted as much because it also builds the Jeep Patriot and Compass, which are up 42.8 percent and 3.2 percent, respectively.
Source: FCA, The Detroit News