Chrysler Restarting Seven Assembly Plants

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Researched by Industrial Info Resources (Sugar Land, Texas)--In January, the company's very existence was in doubt. In April, it filed for bankruptcy protection and turned off equipment, shut plants and told workers to go home and wait. June saw an emergence from bankruptcy with new leadership, a new division of ownership, and some very interesting plans for total recovery. Now, at the end of June, Chrysler Group LLC (Auburn Hills, Michigan), the "new" Chrysler, will officially dust off its equipment, turn on the lights and start up assembly lines once more at seven plants as it begins its journey into the unknown future.

The plants to be returned to operation include the St. Louis North plant in Missouri; the Sterling Heights and Warren assembly plants in Michigan; the Toledo, Ohio, assembly plant; the Toluca, Mexico, assembly plant; and the assembly plants in Brampton and Windsor, Ontario. These plants will remain in operation for the next two weeks, until July 10, when Chrysler will officially close all plants for the traditional two-week summer maintenance shutdown.

However, here is where things get interesting: Chrysler will not be reopening the St. Louis North truck plant after the summer shutdown. Citing poor truck sales, Chrysler has announced that it will officially close the St. Louis North plant July 10, ending Chrysler's presence in Missouri after the company closed the St. Louis South minivan plant in September of 2008. Some tooling, specifically for the Rambox feature of storage boxes, will be moved to the Warren, Michigan, truck plant. Chrysler will continue to produce trucks at both Warren and at the Saltillo, Mexico, truck plant. However, with a 115-day supply of trucks still available as of June 1, the other two plants may see cutbacks as well unless sales improve.

Chrysler will also be closing five other assembly plants by 2010. These plants will be located in the states of Michigan, Ohio and Wisconsin. Exactly which plants will be closed has not been announced as of yet, but Chrysler will continue to work with the United Autoworkers union (Detroit, Michigan) to determine the best method of eliminating the necessary workforce to allow these cuts to occur. With the closing of the St. Louis North plant, Chrysler will put 1,200 workers out of jobs, and this does not take into account the number of tier suppliers in the St. Louis area who had relied on the pair of St. Louis plants. A number of these suppliers will be forced to close in the near future, and many more will shut their doors by 2010 as these additional cuts take place.

Chrysler now has to make other difficult decisions. First is has to decide how the company is going to cut back the number of models; this will help lead to the additional plant closures mentioned above. Second, or possibly at the same time, they will be determining what Fiat SpA (OTC:FIATY) (Turin, Italy) models will be brought to the U.S. for production at Chrysler plants and the capital investment that will be required at those plants to make the production of smaller, more fuel-efficient vehicles a reality. Third, Chrysler is going to have to market the new company heavily to in order to regain consumer confidence, without which all of these efforts and investment would be for naught, as Chrysler will end up right back where it was before bankruptcy.

Chrysler's coming months are going to be very interesting to watch. The company has to reinvent itself while reducing infrastructure, eliminating jobs and reintroducing America to Chrysler and Fiat. The company also has to make all of this work while spending less money and keeping their bare-bones operation alive and well. At the same time, General Motors Corporation (OTC:GMGMQ) (GM) (Detroit) and the balance of the automotive sector will be watching things closely to see how well Chrysler pulls this off, especially since GM will be attempting almost the exact same process in a few months, once the company emerges from its own bankruptcy proceedings. All in all, 2010 will be the year that can make or break Chrysler in the U.S.; hopefully the company can pull things together and emerge as an even stronger automobile manufacturer.

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