Chrysler Group has announced major job cuts and plant closures (termed ‘idlings’) as part of what it calls “the next major part of [a] turnaround plan to regain competitiveness under difficult business circumstances”.
Over the course of the next three years, Chrysler will reduce its workforce by approximately 20 percent across both salaried and hourly employees. This will affect about 26,000 people — 19,000 hourly and 6,800 salaried (including 1,800 ‘supplemental employees’ on temporary contracts) — through a combination of retirements, ‘special programmes’, layoffs and attrition.
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Speaking at a press conference, Chrysler’s senior vice-president of human resources, Nancy Rea, said that she expected half to take up one of the severance programmes.
However, Chrysler says it will make cuts of only 10 per cent in the production engineering area so that the company continues to roll out innovative vehicles.
Chrysler expects that 75 percent of the overall job cuts will be made this year within the framework of existing union contracts. It has deferred payment of year 2000 bonuses to active executives until 2002 and is offering them the chance to double their 2001 bonus with what Zetsche called ‘turnaround incentives’.
“Today’s actions will help remove the uncertainty many of our employees have been feeling,” said Chrysler Group president and chief executive officer Dieter Zetsche.
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By GlobalData“Part of this process may be painful for many people. However, to be truly competitive in today’s auto industry environment, we need to be a more nimble company, more closely aligned with current and future market conditions.”
Zetsche said: “Only by adapting our overall cost structure, workforce and production levels to the realities of the marketplace, while maintaining our investments in exciting products, can we establish a sound basis to ensure the long-term health of the Chrysler Group for its numerous stakeholders and be in strong position for future growth.”
“We are taking these actions at this time, in order to accelerate improvement in Chrysler Group’s financial performance,” continued Zetsche.
He noted that the full Chrysler turnaround plan, with details of the financial impacts, will be presented to the public at the DaimlerChrysler Annual Press Conference on February 26, 2001.
A series of ‘manufacturing actions’ will be necessary to attain the objectives, including reducing shifts and line speeds, as well as ‘idling’ selected plants to adjust production capacity at Chrysler manufacturing operations around the world.
Chrysler plans to reduce excess capacity by closing six manufacturing facilities over the next two years.
The company also will adjust component, stamping and power train volumes in line with the reductions in assembly capacities. Overall, the workforce reduction will be proportionately greater in Canada than in the United States due to the higher number of employees in assembly operations whose products are affected.
One casualty of the new plan is a halt to an expansion of the Pilette Road asssembly plant in Windsor, Ontario, Canada. Executives said that the new paint shop currently being constructed would be closed in but not fitted out for the forseeable future. A question mark also hangs over an R&D facility being developed in conjunction with a local university.
In addition, all facilities have new targets to accelerate quality levels and productivity, so that the company can operate more efficiently and at a much improved cost structure over the mid to long term.
“Especially as we implement these actions, we are fully committed to ensuring what has always been a key strength at Chrysler – an exciting and innovative range of products,” said Zetsche.
“These initiatives reinforce that commitment by minimising our workforce reductions within the product development organisation.”
RETIREMENT PROGRAMMES
“Given that Chrysler Group has a large number of retirement-eligible employees, we believe that a large part of our goal can be reached through voluntary special retirement programmes by the end of the first quarter this year,” said Zetsche.
Some 23,700 hourly (U.S.: 21,000; Canada: 2,700) and 4,920 salaried (U.S.: 4,600; Canada: 320) employees in the U.S. and Canada are eligible for regular retirement or for one of the special programmes, Chrysler says. The normal attrition rate is between three and five percent, including retirements, and the aim of the programmes announced today is to increase attrition to achieve the desired ‘downsizing’.
Chrysler will offer some 2000 employees aged 55 to 61 with over 10 years’ service a special retirement deal where they will be treated as if aged 62 or older. Those aged 62 or over will be additionally ‘incentivised’ with cash payments and a car voucher.
Notices go out to these employees on February 6 and they will leave on February 28.
More ominously, Chrysler notes that the number of layoffs necessary to meet the workforce reduction goals in the near term will depend on participation rates in these programmes. Rea said that once the number of voluntary retirements is known, the involuntary layoffs will start. Employees will get two weeks’ notice and leave on March 31.
Chrysler will provide retirement planning services to counsel eligible employees through the changes.
“Our management team has maintained an open and continuous dialogue with the leadership of the United Auto Workers (UAW) and the Canadian Auto Workers (CAW), as well as with other employee representatives,” said Zetsche. “In that process of discussion, solutions were found that are in line with the framework of our current labour contracts.”
It is understood that ‘idling’ rather than outright closure of factories was one key agreement reached in the negotiations with the unions.
Chrysler said that the layoffs and plant closures are a crucial part of the company’s latest initiative in its turnaround plan, following a material cost reduction program that was put in place at the start of this year.
MANUFACTURING ACTIONS
The Chrysler Group manufacturing actions include the following:
2001
UNITED STATES
- Belvidere (Illinois) will eliminate one shift of operation
- Jefferson North (Detroit, Michigan) will eliminate one shift of operation
- Toledo II (Ohio) Assembly Plant will eliminate one shift of operation
- Newark (Delaware) Assembly Plant will reduce line speed
CANADA
- Bramalea (Brampton, Ontario) will eliminate one shift of operation
- Pillette Road (Windsor, Ontario) will eliminate one shift of operation
- Windsor (Ontario) Assembly Plant will reduce line speed
MEXICO
- Toluca Transmission Plant will close
SOUTH AMERICA
- Cordoba (Argentina) Assembly Plant will close
- Campo Largo (Parana, Brazil) Assembly Plant will discontinue production and be idled; an evaluation will be made on any future production possibility at that facility
2002
UNITED STATES
- Engine production will be shifted from the Mound Road (Detroit, Michigan) Engine Plant to Mack I and Mack II (Detroit, Michigan)
MEXICO
- Lago Alberto Assembly Plant will shift production to the Saltillo Assembly Plant
- Toluca Engine Plant will close
