Wednesday, May 16, 2007

Chrysler's Belvidere assembly plant on solid ground

by Jessica Desvarieux
May 15, 2007



Employees at DaimlerChrysler’s Belvidere, Ill. plant might be able to breathe a sigh of relief after private equity firm Cerberus Capital Management concludes its purchase of an 80.1 percent stake in the automaker.

At least in the near term, high demand for the models rolling off the Belvidere assembly lines will likely provide some cushion of security for the plants 8,100 workers, according to industry observers.

Meanwhile, the United Auto Workers union is determined to ensure that contract gains are not lost after the deal is consummated sometime in the third quarter.

“It’s going to happen, and we’re going to make it happen in the best interests of our membership,” said United Auto Workers President Ron Gettelfinger in a news conference on Monday. “We believe we’re going to get a lot of mileage out of our position.”

The Belvidere assembly plant has 8,161 employees and makes some of the more popular models in Chrysler’s stable: Dodge Caliber, Jeep Compass and Jeep Patriot, along with running a satellite stamping facility.

U.S. sales of the Dodge Caliber were 92,224 units in 2006 and estimated to be about 94,724 in 2007, while U.S. sales for Jeep Compass were 18,579 in U.S. and estimated to be 47,323 in 2007, representing a full year on the market. Jeep Patriot, released in the Fall of 2006, 2007 estimated sales are 54,785, according to Waltham, Mass.-based market research firm Global Insight Inc.

The plant's prospects have remained upbeat during the past couple of years. In 2005, Chrysler and the Illinois Department of Commerce and Economic Opportunity teamed up to add 1,000 new jobs at the Belvidere assembly plant. The state funded the project with $36 million along with Chrysler’s $419 million expenditure to completely overhaul the plant.

Chrysler also included another operating shift in July 2006 due to the hefty demand for the Dodge Caliber.

“Based on their current model lineup, I don’t see them being vulnerable in the short-term,” said Catherine Madden, senior automobile industry analyst at Global Insight.

Madden said facilities that produce more mature models, like the Dodge Ram, Dodge Caravan, and Chrysler Town & Country are more vulnerable since consumer demand for these models has waned.

“These plants may be more vulnerable long-term, if Chrysler decides to consolidate assembly or reduce shifts,” Madden said.

Madden said she has no doubt that the facility's costs will be reviewed, but its strength should keep the plant on solid ground.

Indeed, DaimlerChrysler CEO Thomas W. LaSorda emphasized, when the $7.4 billion deal was announced on Monday, that there are no new job cuts envisioned as a result of the transaction.

Madden added the flexibility within the UAW’s current contract with DaimlerChrysler will also make it easier for Cerberus to have a working relationship with the assembly plant.

However, cost cutting isn’t out of the question. “To move forward, there will have to be some level of concession made,” Madden said.

Madden said the market truly remains the deciding factor in the plant’s future.

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