The worsening U.S. auto sales slump hit Chrysler LLC again Monday as it announced plans to close one St. Louis-area factory and cut a shift from another because of declining demand for minivans and pickups.
Officials with the Auburn Hills-based automaker said in a conference call that it will shutter the St. Louis South plant, which makes minivans, effective Oct. 31. The St. Louis North plant, which makes full-size pickups, will be cut from two shifts to one effective Sept. 2.
The minivan plant’s closure will cut 1,500 jobs, and it wasn’t clear if the company would ever recall the 900 workers who will be laid off at the pickup truck plant. Both factories are in Fenton, a St. Louis suburb.
Chrysler President and Vice Chairman Tom LaSorda said the company has no plans to reopen the minivan plant. He said there’s only enough minivan demand for three shifts, which the company already has running at its factory in Windsor, Ontario.
“We have too much capacity,” he said, adding that the company had to reduce its factory capacity to remove fixed costs. “Those are the tough decisions we have to make, but that’s the decision we did make.”
LaSorda also denied rumors that Chrysler’s owner, Cerberus Capital Management LP, planned to sell the company in pieces.
“Hogwash, absolutely not being considered at all,” he said. “Absolutely no relevance. I don’t even want to entertain those questions.”
He would not say if workers at the pickup truck plant could be recalled, adding that the company never announces whether a shift cut is permanent “because that is something we cannot foresee.”
The company will hold meetings with affected workers to review severance programs, LaSorda said.
LaSorda blamed the moves on a slowing economy, high gasoline prices and a shift in consumer demand from larger vehicles to smaller, more fuel-efficient ones.
He said the private company is meeting or exceeding its financial targets but “this environment is forcing us to make some very difficult decisions.”
Vice Chairman and President Jim Press said despite the cuts, Chrysler remains bullish on the minivan and pickups. He said there’s a market for people who need pickups for work, and that minivans are fuel-efficient alternatives to big sport utility vehicles.
“We have to better align the volume with our inventories,” he said.
He would not rule out further cuts in pickup production, depending on market demand.
“We’re assessing this as the industry continues to move,” he said, adding that he’s hopeful the new 2009 Ram pickup will sell well. “The thing that keeps these places running is what happens at retail and what happens in the marketplace. Things are shifting, but people still need trucks.”
Also Monday, Press said June sales continued the downward trend from May, with a continued shift from trucks to cars. Automakers announce June sales on Tuesday. He also said Chrysler is making progress in shrinking its model lineup, but he would not say when that would be complete.
Monday’s announcement comes after Chrysler lengthened summer shutdowns at several plants.
The company said in a memo sent to workers Wednesday that it would close the Toledo North Assembly Plant in Ohio for seven weeks from July 7 through the week of Aug. 18 due to sagging sales. The plant makes the Jeep Liberty and Dodge Nitro midsize SUVs.
The Newark, Del., Assembly Plant, which makes the Dodge Durango and Chrysler Aspen SUVs, was closed starting Monday for five weeks, with workers scheduled to return Aug. 4, and the Warren, Mich., truck plant, which makes the Dodge Ram pickup, will shut down for five weeks this summer, according to union officials.
Most auto factories are idled for only one or two weeks during the summer as the company shifts from one model year to the next.
Chrysler’s U.S. sales were down 25 percent in May, a month in which the whole market dropped 11 percent when compared with May 2007. Through the first five months of the year, Chrysler’s sales were off 19 percent, with huge drops in larger vehicles that make up most of its lineup.
Ram pickup sales were down almost 27 percent when compared with the first five months of 2007. Sales of the Dodge Caravan minivan were down almost 35 percent through May, while sales were off just over 13 percent for the Chrysler Town & Country minivan.
LaSorda said the company is still meeting or exceeding all of its internal financial goals, and that it had cut production last year in anticipation of a U.S. market slowdown.
General Motors Corp. and Ford Motor Co. already have announced cuts due to the latest market downturn. Chrysler announced cuts in November, but analysts have said the company needs to do more.