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Chrysler clarifies closings

by David Zatz on


Chrysler LLC issued this statement today regarding plant closings:

We understand that there has been some confusion over the past few days regarding the status of certain Chrysler facilities in connection with its restructuring plan, as was disclosed as part of the company’s Chapter 11 filing last week.  We recognize that in the context of consummating the Chrysler-Fiat alliance and last week’s filing, we did not communicate in the fashion we could have with the affected communities.  We are committed to working with every Chrysler community throughout this restructuring process.

On Feb. 17, 2009, Chrysler LLC submitted its Viability Plan to the U.S. Treasury and the President’s Auto Task Force.  As part of this plan, a number of restructuring actions were designed to address significant declines in the Seasonally Adjusted Annual Rate (SAAR) of auto sales (from 15.6 million in January 2008 to 9.8 million in January 2009) and position Chrysler for future success.

Chrysler’s stand-alone plan contemplated several plant closings based on continued volume deterioration trends, as well as a plan that contemplated a global alliance with Fiat that enhanced its stand-alone plan, and included significant concessions from all stakeholders.  The specific plant actions were not made public because it would have been presumptuous to assume that the plan was going to be approved and inappropriate to communicate prior to thorough discussion with the United Auto Workers union.

On March 30, 2009, the U.S. Treasury and the President’s Auto Task Force rejected Chrysler’s stand-alone Viability Plan.  However, the Task Force agreed that Chrysler could submit a plan that would be evaluated with a decision made by April 30, provided that it include a global alliance with Fiat and more aggressive sacrifices by all stakeholders.

Between March 30 and April 29, 2009, Chrysler diligently pursued this path.  Fortunately, Chrysler was able to secure an alliance with Fiat.  The capacity reductions in the new alliance framework mirrored the Feb. 17 plan, although some of the timing was changed due to continued shifts in volume trends and consumer demand.

As a result, on April 30, Chrysler LLC announced that it reached a definitive agreement to establish a global strategic alliance with Fiat to form a vibrant new company.  This alliance will save Chrysler more than 50,000 jobs worldwide, including the preservation of more than 30,000 U.S. and 9,000 Canadian jobs, along with thousands of employees at dealers and suppliers.  This far outweighs the alternative of liquidation.

In order to effectuate this plan, Chrysler filed voluntary petitions under Chapter 11 of the U.S. Bankruptcy Code.  Chrysler also filed a motion under Section 363 of the Bankruptcy Code, requesting swift approval by the court of the agreement with Fiat and the sale of Chrysler’s principal assets to the new company.  The substantial majority of Chrysler’s assets, operations, plants and people will be transferred to the new company, while assets and liabilities that are not consistent with Chrysler’s business plan will remain with the old company for disposition.  Under the supervision of the court, and with the support of the U.S. Treasury and the President’s Auto Task Force, the new company will quickly emerge from bankruptcy as a restructured and financially healthy organization.

The plants currently scheduled for closing are as follows:

Sterling Heights Assembly Plant:  A severe decline in the market has resulted in reduction of volumes, and thus made operation of this plant not possible.  The plant is expected to continue operation through December 2010.

Kenosha Engine:  Unprecedented reduction in volume and demand for products has resulted in the decision to idle the plant in December 2010.

Detroit Axle:  All required work will be moved to a new facility that is being developed in nearby Marysville, Mich.  The plant will be idled in December 2010.

Twinsburg Stamping:  Due to deteriorating volumes, and in order to optimize capacity, existing volume will be transferred to Warren Stamping and Sterling Stamping plants effective March 2010.

Conner Avenue Assembly Plant:  The facility and vehicle platform has been for sale since 2008.  The site is scheduled to idle December 2009.

St. Louis North Assembly Plant:  Due to volume reduction in the truck segment, capacity will be optimized by moving RamBox™ production to Warren Truck Assembly Plant effective third quarter of 2009.

Newark Assembly Plant (closed December 2008)

St. Louis South Assembly Plant (closed October 2008)
While most manufacturing operations have been temporarily idled in order to reduce dealer inventory and as part of the restructuring process, this idling was not the result of the bankruptcy filing, and we expect that most workers will be back on the job following the bankruptcy proceedings and the formation of the new company.

It is expected that virtually all employees associated with these facilities will be offered employment with the new company.  The Jefferson North Assembly Plant is scheduled to add a second shift, which represents 1,200 jobs coinciding with the introduction of the all-new Jeep® Grand Cherokee. 

While the company continues to address difficult market conditions, this alliance will ultimately provide Chrysler customers and dealers with a broader and more competitive lineup of fuel-efficient vehicles and technology.

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