Chrysler Announces Mandatory Two-Week Shutdown of All Plants in July 2008

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Researched by Industrial Info Resources (Sugar Land, Texas)--The month of July for the North American automotive industry is typically one of maintenance and repair. However, with each of the Detroit Three in various stages of reorganization, the traditional downtime in July is going to be extended and expanded beyond maintenance. On Thursday, March 13, 2008, Chrysler LLC (Auburn Hills, Michigan) sent an e-mail to all employees addressed by Chief Executive Bob Nardelli that all employees, both salaried and hourly, will take a mandatory two-week vacation beginning on July 7, 2008, and ending July 21, 2008. Some employees will still be required to work on special projects during this time.

All North American assembly plants, plus the majority of the major tier suppliers, usually take their respective plants down for semi-annual or annual maintenance shutdowns in July. These shutdowns can range in length from three days to 14 days, depending on the amount of maintenance work that needs to be accomplished at each respective plant. Maintenance is usually performed in July because of the convenience of the Fourth of July holiday. Additional maintenance typically takes place in December around Christmas time.

According to Nardelli, this mandatory shutdown of operations is required to assist Chrysler in creating "efficiency across organizational lines and boost productivity". Since Chrysler's purchase by Cerberus Capital Management LP (New York, New York), a private equity firm that specializes in purchasing troubled companies and returning them to profitability, numerous job cuts, temporary shutdowns and buyout offers have occurred. Cerberus Capital now owns an 80% stake in Chrysler. The company has a buyout offer on the table that would give participants about $100,000 for leaving the company. Chrysler was hoping to eliminate about 10,000 of its 44,000 hourly jobs with this round of buyouts, but early indications are that it will not reach that goal.

In addition, Chrysler is reducing its product offerings. The company currently produces 30 models of vehicles, and it plans to cut that number in half, removing redundant models throughout their Chrysler, Dodge and Jeep line of cars, trucks and minivans. After these model cuts are announced, it is expected that the automaker will be looking at either closing additional plants or reducing shifts at many plants, which would mean additional job cuts across North America.

Although this reorganization and job cuts are going on, Chrysler is still continuing with its aggressive capital-expenditures program across the continent, including more than $4.5 billion worth of investment in its infrastructure. Some of the key projects the automaker is still pursuing include the proposed $1.4 billion automobile assembly plant retool in Ontario, a $730 million grassroot engine-manufacturing plant and a $700 million grassroot axle-manufacturing plant in Michigan, a $570 million grassroot engine-manufacturing plant in Mexico, and a $450 million engine-manufacturing plant expansion in Wisconsin.

Spokesmen for General Motors Corporation (NYSE: GM) (Detroit, Michigan) and Ford Motor Company (NYSE: F) (Dearborn, Michigan) have indicated that they will idle their facilities during July for routine maintenance as they have traditionally done. The length of the shutdowns will vary based on the plants' needs.

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