Chrysler Closing Five Plants as Part of Bankruptcy Proceedings

---

Researched by Industrial Info Resources (Sugar Land, Texas)--As part of Chrysler LLC's (Auburn Hills, Michigan) bankruptcy filing, some of the company's plants in the U.S. are in the process of being sold to Fiat SpA (OTC:FIATY) (Turin, Italy). Others, not included in the deal, will need to be closed. A total of five plants, consisting of three assembly plants, one stamping plant and one engine manufacturing plant, will be closed by December 2010.

In addition, two plants that were already shuttered, as well an engine plant that Chrysler had already planned to replace, will not be included in the deal with Fiat. Chrysler plans to lease these plants to the new company that will be formed by the bankruptcy court and then proceed with the closings.

The assembly plants that will close are the Sterling Heights, Michigan, plant that currently makes the Chrysler Sebring and Dodge Avenger; the Conner Avenue plant in Detroit, Michigan, that makes the Dodge Viper; and the St. Louis North plant in Missouri that makes Dodge Ram pickups. The St. Louis South assembly plant, which made minivans, and the Newark, Delaware assembly plant were closed last year as part of Chrysler's cost-cutting measures.

Chrysler has almost completed construction of a $700 million grassroot axle plant in Michigan that will be included in the Fiat deal. However, the existing axle plant in Detroit, which was to be replaced by the new plant, will not be included and will be shut down as well. In addition, Chrysler's Kenosha, Wisconsin, engine plant, where the struggling automaker had intended to invest $450 million to expand production capacity, will be closed as well. The expansion project was placed on hold when the automaker began investigating the possibility of bankruptcy. The other plant that will close is Chrysler's parts-stamping plant in Twinsburg, Ohio.

All of these closings are certainly necessary, but they will be a hard pill to swallow for the approximately 4,800 employees who will lose their jobs as a result. Chrysler has no choice but to cut back on operations if it is going to make the bankruptcy proceedings successful. Additional cuts and closings will probably be necessary as well once Chrysler, with the court and Fiat's assistance, decides what models the company will continue to produce. Chrysler currently makes 30 models of cars, minivans and pickups, a number that needs to be cut almost in half if the company is going to have any chance of returning to viability.

There have been some talks about selling the Jeep brand and the Town & Country minivan line to struggling automaker General Motors Corporation (NYSE:GM) (GM) (Detroit), but the likelihood of this occurring is slim. GM is going through its own restructuring process and will possibly be facing bankruptcy court itself if the company cannot meet the June 1 deadline imposed by the Obama administration for producing a viable restructuring plan. If GM cannot develop a plan by that deadline, the federal government will cease to provide taxpayer dollars to the embattled automaker, and bankruptcy will be the only option.

The fall of Chrysler was not a surprise to those who track the North American automotive sector. Chrysler has been the smallest of the Detroit Three for decades, and with the economic collapse, credit crisis, housing collapse and the troubles on Wall Street in recent months, something had to give. All of the Detroit Three have been running on borrowed time for several years as mismanagement, poor decision-making at the corporate level and a lack of touch with the reality of the marketplace has driven the U.S. automakers into the ground.

With sales continuing to fall, the likelihood that GM will be joining Chrysler in bankruptcy court appears more and more probable. The summer of 2009 is going to be a very interesting time for U.S. automakers as Chrysler works its way through the court system, sells off assets, closes facilities, lays off workers and tries to regain the viability the company lost while GM attempts to stave off the same fate. The plant closures at Chrysler were inevitable and would have had to happen anyway at some point, but now the struggling automaker can at least blame the closures on the courts.

View Plant Profile - 1025343 1025349 1021278 1025355 1509696 1015962 1515050 1073056 1075216
View Project Report - 18002469 19001637

Industrial Info Resources (IIR) is a marketing information service specializing in industrial process, energy and financial related markets with products and services ranging from industry news, analytics, forecasting, plant and project databases, as well as multimedia services.