Chrysler cuts 150,000 enough?

BY KATIE MERX

FREE PRESS BUSINESS WRITER

With Chrysler LLC’s announcement last week of an additional 12,000 job cuts, the number of jobs to be eliminated from U.S. and Canadian automakers and their former parts arms in the second half of this decade has grown to 150,000 — and counting.

With buyouts or early retirement offers expected at all three Detroit automakers in the wake of new UAW contracts that allow new hires to get less in pay or benefits, the number is sure to grow soon.

And in the future, as the American automakers face competition from more and more rivals from low-cost countries, analysts say, more painful cuts will almost certainly follow. Just days after hourly workers ratified a new labor contract, Chrysler said it plans to nearly double the 13,000 job cuts it announced in February, now targeting the elimination of more than 25,000 hourly and salaried workers, or nearly one-third of its workforce.

Add the Chrysler cuts to the expected job cuts — at least 137,400 of them — already in the works at General Motors Corp., Ford Motor Co. and its ACH unit, and Delphi Corp. between 2005 and 2009, and the total American job reductions rise to about 150,000. The total, derived from an analysis by the Center for Automotive Research earlier this year and subsequent company announcements, includes the 34,410 hourly buyouts and retirements at GM last year, and the more than 30,000 jobs eliminated at Ford since 2005 and the planned shutdowns and sell-offs of 35 Delphi and ACH plants.
That doesn’t include the thousands of jobs lost at other auto suppliers affected by the downsizing. And still, analysts, union officials and autoworkers say the pain isn’t over.

“We’ve been overbuilding for years and years, and now it’s catching up to us because we’re losing market share,” said Kenyon Hall, a 31-year-old assembly worker at Chrysler’s plant in Belvedere, Ill., where the automaker plans to eliminate a shift. “They waited too long to do something. Now it’s going to be painful for a while.”

Analysts expect that even the latest restructurings leave Detroit automakers larger than they will need to be in future.

“Unless there’s significant changes, you will have more cuts,” said Kevin Tynan, auto analyst at Argus Research. “My target for where the market settles out has GM with 20% of the U.S. market, Ford with 10% and Chrysler at 10%.”

Through October this year, GM sales were almost 24% of the market, Ford owned nearly 16% and Chrysler sales made up almost 13%. Combined, they share less than 52% of the U.S. market. A decade ago, they had almost 72% of the market.

Further job reductions are contingent on continued shrinkage among the Detroit Three, analysts acknowledge.

Any of the automakers could suddenly hit home runs with new products or could benefit from the government addressing trade or policy issues.

Of the Detroit automakers, analysts generally consider GM to be the farthest along in its turnaround and say that if the automaker is able to take its Chevrolet Volt electric car to market by the end of the decade, it has the potential to change the game.

For the most part, however, analysts agree that the U.S. automakers will continue to lose market share and therefore will continue to shed jobs and close and consolidate plants to align production with demand.

“It’s hard to say the worst is over for the industry because we’re looking at a moving target and it’s moving down, not up,” said George Magliano, president of consultancy Global Insight.

Erich Merkle, analyst and chief forecaster at IRN Inc., a Grand Rapids-based automotive consulting firm, agreed the domestic auto industry hasn’t reached the bottom yet.

“In terms of pain, I don’t have a solid number,” Merkle said, “but in my opinion, they’re still working around the edges.”

Merkle said he applauds Chrysler’s owner, private equity firm Cerberus Capital Management, for at least making cuts swiftly, “as opposed to say Way Forward one, two and three.”

Ford has revamped Way Forward, its restructuring plan, once already and is expected to announce more changes soon.

But Merkle said their steps are insufficient, because they’ve made moves that reduce some plants to one shift, which is not considered an efficient use of resources.

The good news in Michigan, Merkle said, is that while the state has lost thousands of automotive jobs — at least 40,000 — it could have been worse.

“A lot of cuts have happened,” Merkle said. “I know it’s hard for a lot of people to see, but it’s a lot better than it could be. The automakers are closing plants, but a lot of the complete plant closures are happening outside Michigan. … When plant consolidations occur, there are arguments for them to be consolidated in Michigan, where the supply base is.”

But Buzz Hargrove, president of the Canadian Auto Workers union, said U.S. and Canadian autoworkers should push for government trade policy reforms, and not hope in vain for recovery without them.

“This won’t be over until our governments” address trade policy imbalances, Hargrove said. “Our industry is going to get smaller and smaller and smaller. … You can’t bargain your way out of it.”

Source : FreeP