NEW YORK: Fiat Chrysler Automobiles NV announced that it plans to cut 1300 jobs at its factory in Sterling Heights, Michigan, where the automaker assembles the low-selling mid size Chrysler 200 sedan.
This is going to be Fiat’s large-scale lay off since 2009, the time it had emerged from bankruptcy. From that time, the company has added around 11,000 hourly employees and has posted monthly sales increase for 72 straight months.
The company made the decision on the basis of the growing demand for SUVs and crossovers and a sharp decline in demand for sedans. Fiat’s announcement will involve job cuts of 41% of the Michigan factory’s hourly workforce. Nearly 120 workers at the nearby factory that produces metal parts for sedan will also lose their jobs. This labor lay off will be effective from July 5.
The company did not mention anything regarding its plan to stop the production of sedan 200, considering its deteriorating demand. Earlier this year, Fiat Chrysler’s Chief Executive Sergio Marchionne announced that the automaker will cease the production of its mid size sedan along with compact Dodge Dart small car, which is built alongside Jeep SUVs in Illinois, unless it gets a partner that could keep the company going. Last month, the CEO informed the dealers that compact Fiat 500 lineup would be streamlined.
The latest job cut move in fact accelerates Mr. Marchionne’s efforts of shifting the company’s focus from small-car production and more toward production of trucks and SUVs. The CEO has already kept $1 billion to make these changes in its US manufacturing site. The Michigan plant is likely to be revamped so that it can build pickups and SUVs. However, up till now no further details have been mentioned.
As per the latest auto sales figures revealed by Fiat, its sales of the Chrysler 200 have crashed 63% between January to March, as compared to a year ago. Once, Chrysler 200 and Dart were the evidence that the automaker can make mall cars successfully in the US.
According to the statement issued by United Auto Workers (UAW)’s Vice President, Norwood Jewell, this move was expected and was optimistic that Fiat will hire workers to ramp the production of trucks and SUVs.
Mr. Jewell said: “FCA is not the only company experiencing a slow market for small cars.” He added: “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.”
According to the recent data revealed by industry consultant, Auto data Corp, last year passenger cars contributed 44% of total US auto market sales, lower than 48% in 2014. Through March, sales of Chrysler 200 have dropped over 60% this year, in contrast to last year. In addition, the sales of Dart plunged 30%. The automaker is still lying on with around five months worth of inventory of Chrysler 200 and the three months’ worth inventory of Darts.
Fiat has now started to offer discounted financing in Chrysler 200 and Dart, in place of the cash rebates that it was previously offered. On the other hand, through March, 57% of the total vehicles purchased in the US were categorized as light trucks, the trend which is mainly driven by cheaper gasoline prices.
In recent times, Fiat’s auto sales gains have been supported by robust sales of its Jeep SUV and Ram truck brands, while weakness in the demand for small cars have been a concern for the company.
Fiat’s rival automaker, Ford has also announced plans to shift its small car production to Mexico. On Tuesday, the company announced that it will spend $1.6 billion to build a new factory in the region for small cars, which will allow the automaker to make more trucks in US.
Slashing jobs on such large-scale was once the common practice of the three giant Detroit automakers. Last year, the giant automakers General Motors and Ford have adjusted to the shift in the US auto market, cutting jobs and production for some of their models, while adding to those of others.
Fiat Chrysler is on the cusp of passing Toyota Motor Corp. as the No.3 seller in the US., a position it has not held since 2006.
Yesterday, Fiat Chrysler announced that it is investing $500 million to revamp its Cordoba plant in Argentina, where it plans to build a new vehicle for Latin American market. This means that there will be job additions by the automaker. As reported by Reuters, Mr. Marchionne stated in a ceremony in Argentina: “We have decided to install a new modular platform for the production of a completely new model that will only be produced at this plant, with the majority of production destined for export.”
Until now the company has not made it clear as to which of its vehicle will be manufactured there. However, once the production starts in the latter half of 2017, mainly for the markets in Latin American, it is likely to produce more than 100,000 vehicles per year. Overall, the company is likely to incur huge expenditure in retooling the facility, installing more than 150 robots in the body shop, and training and research development.