Chrysler cuts back minivan output

Automaker latest to slash truck production as fuel prices shift consumer demand to smaller vehicles.

Eric Morath / The Detroit News

Chrysler LLC, facing plummeting sales of its trucks and minivans, followed its crosstown rivals Monday in significantly cutting production as rising gas prices push consumers toward more fuel-efficient models. The move comes as Detroit’s Big Three are expected to report further declines in demand for large vehicles when June sales figures are released today.

Auburn Hills-based Chrysler will close a minivan plant in Fenton, Mo., near St. Louis, cut a shift at a nearby pickup factory and extend summer shutdowns at eight more truck plants to adjust for slumping sales of SUVs, pickups and minivans. At the same time, the automaker is ramping up production of fast-selling compact cars and car-based crossovers.

The actions announced Monday will cost about 2,400 workers in Missouri their jobs and thousands more will be laid off across the country for at least four weeks this summer. "The auto industry is going through some turbulent times … with a rapid consumer shift from trucks and SUVs to smaller, more fuel efficient vehicles," Chrysler Vice Chairman and President Tom LaSorda said Monday in a conference call with reporters. "This environment forces us to make very difficult decisions. It’s important to act now to align ourselves with the current market reality."

LaSorda cited high gas prices, a struggling housing market and changing consumer tastes for the decision to cut back production of some of its most important models: the Dodge Ram pickup and Dodge Caravan and Chrysler Town & Country minivans.

The St. Louis South minivan plant will close indefinitely on Oct. 31, and LaSorda said Chrysler has "no intent" to reopen it. The St. Louis North truck plant, where the Dodge Ram pickup is built, will drop to a single shift Sept. 2.

Affected employees will be offered buyout and early-retirement packages, LaSorda said. UAW officials did not return calls seeking comment.

The automaker also is extending the typical two-week summer shutdown at eight plants, including its Warren Truck Assembly plant, which was closed last week and will reopen Aug. 4, and its Jefferson North plant in Detroit, which will shut down later this month for four weeks, reopening Aug. 11. Dodge Ram and Dakota pickups are built in Warren; Jeep Grand Cherokee and Commander SUVs are built in Detroit.

Other plants are working overtime to churn out more fuel-efficient models. They include factories in Belvidere, Ill., where the compact Dodge Caliber and Jeep Patriot and Compass are produced; Sterling Heights, where the Dodge Avenger and Chrysler Sebring sedans are built; and Toluca, Mexico, home of the Dodge Journey and Chrysler PT Cruiser.

Despite the production cuts, Chrysler remains financially sound, LaSorda said. A recent report to investors from Chrysler majority owner Cerberus Capital Management LP showed the automaker lost $300 million in the first four months of the year — less than a projected loss of $700 million, said Bloomberg News.

"You finally saw some evidence of everything we are saying," LaSorda said about the investor report, although he did not confirm the figures. "We continue to meet our financial targets, and the company is better positioned than it was last year."

The report said Chrysler had $8.1 billion in cash at the end of April. Chrysler CEO Robert Nardelli has previously said the company ended 2007 with $9 billion cash and lost $1.6 billion.

Cutting production, and avoiding inventory buildup, is what Chrysler needs to remain viable, said Aaron Bragman, automotive analyst for Global Insight Inc.

"For years, Chrysler kept the factory running no matter how many cars were on dealer lots, causing them to lose money on almost every car they sold," he said. "Cutting production will cost money too, but it’s the less painful of the two options."

Chrysler would not specify how many fewer vehicles it will produce as a result of the cuts, but based on production through May, the company will build about 15,800 fewer minivans and 17,000 fewer pickups this year.

Most other automakers have also cut factory output. Last month, General Motors Corp. said it would close four truck plants by 2010 and extend the traditional summer shutdown to further reduce truck output by 170,000 vehicles in the second half of the year. Ford Motor Co. said it would slow or temporarily idle production at six plants and planned to cut total production by another 90,000 units this year.

Toyota Motor Corp. has slowed production of its Tundra pickup at plants in Indiana and Texas. Honda Motor Co. has also reduced light truck output, and Nissan Motor Co. plans to increase car production at its Canton, Miss., plant and reduce truck output there to a single shift.

In closing the St. Louis plant, Chrysler is accepting that the market continues to turn away from the family haulers, even though they tend to be more fuel-efficient than similar-size SUVs.

"People who want to get out of an SUV because gas prices are high prefer the image of a crossover to the image of a minivan," Stephanie Brinley, an analyst at AutoPacific Inc. in Southfield.

The decline of Dodge Caravan sales, which are down 25 percent through May, according to Autodata Corp., is a concern to Ken Lewenza, president of Canadian Auto Workers Local 444, which represents workers at Chrysler’s Windsor minivan plant.

"We know they have nowhere else to go now but to cut us, if sales keep going down," he said.

Some workers who will have extended summer vacations as their plants are shut down were pleased. Those workers make about 95 percent of their typical take-home pay while on layoff.

"People are happy to have a little downtime," said James Elmore, a Jefferson North worker from Detroit. "With gas prices the way they are, a lot of us will be better off not commuting to work."