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windsor – “hi, i’m on maternity leave right now, and I was just wondering if you can tell me about the rumours I’ve been hearing.”Since there’s no message to be taken, I just put my pen down. I’ve been filling in for a union rep who has the week off. By Wednesday, I’ve had three calls of this nature.
“Well, you’ll have to be a little more specific. What rumours are you talking about?”
“I’m hearing that they’re going to be laying off Plant Six (Windsor’s big van assembly plant) indefinitely, and then laying off a shift at Plant Three (Windsor’s minivan plant). I mean, I’ve got two years seniority. What’s going to happen to someone like me?”
If that rumour is true, she’d be in deep trouble. That sort of layoff would put somewhere in the vicinity of 2,500 people out on the street.
The only thing to do is tell the caller that the rumours are just that – rumours. If anything of that magnitude was actually in the cards, the union would be keeping the members apprised. She doesn’t sound terribly convinced, and with all the buzz flying around, it’s easy to see why.
This wasn’t supposed to happen. Two years ago, when Chrysler merged with Daimler-Benz, everyone seemed to be falling over themselves over the stroke of genius. Chrysler had flashy designs, a gift for producing lots of cars on the cheap and loads of dough. Daimler had that vaunted German engineering and efficiency that still creeps North Americans out a bit, a global reach and loads of its own dough. Together, we would be a manufacturing colossus, bestriding the Atlantic with offices in Stuttgart, Michigan and New York.
The worlds of business and industry are funny old places, though. While they share with the rest of the world the quality of being in perpetual motion, somehow things seem accelerated. Today’s heroes turn into tomorrow’s goats, and no one seems to bat an eyelash. At some point since the DaimlerChrysler merger two years ago, we went from being cock of the walk to having our cocks on the blocks.
Mind you, the vast majority of autobodies schlepping away the shift really don’t care what the suits do, or what people are saying about them, just so long as the paycheques go into the bank every Thursday.
Now, though, it behooves the folks on the line to pay heed to what’s going on. DaimlerChrysler just lost half a billion dollars U.S. in the last quarter. The word has come down from on high that these losses are to be stemmed. Seven of Chrysler’s 16 North American plants were shut down for one week to “adjust inventories.” That’s fancy talk for having built too many cars.
In all plants, management is cutting corners everywhere, especially on the issue of overtime. That’s making it difficult to get time off. Worse, if you’ve worked overtime and your boss hasn’t gotten exactly the authorizations they are supposed to, payroll will short your hours.
How did this colossus wind up nickel-and-diming its workers over a few hours of time-and-a-half? Alyssa Priddle, a senior editor of Ward’s Auto Report, says it’s a combination of basic economics and dumb-shit ignorance on the part of the company’s German executives. The Germans, said Priddle, “do not understand the North American mass market. They don’t understand incentives, they don’t understand mass production. They’ve dealt with people who will pay $75,000 U.S. for a luxury car and wait to get it.”
Coupled with a glut of rival vehicles in what were once Chrysler’s dominant (and very profitable) segments – minivans, pickup trucks and sport-utility vehicles – Daimler’s executives were left panicking. There are currently about 80,000 Dodge Grand Caravans and Chrysler Town and Country minivans sitting around various lots waiting for dealerships to take them. The dealers were refusing to order any until the company offered them incentives to move them off the lots. The company finally relented, offering rebates on mid-priced vans.
Where Chrysler once got a free ride, now they have to fight to hold onto market share. “Everyone has finally saturated the segments where Chrysler was once dominant,” says Priddle.
At the same time, the entire auto industry began to soften up. That has ramifications for the broader economy. CAW economist Jim Stanford says that every job at an auto manufacturer “supports three other jobs in the broader economy.” It’s a concept economists call forward and backward linkages. Some are obvious – the parts suppliers who make the steering wheels and tires and so on. Others are less obvious, like the mall tenants who end up clothing the kids of autoworkers every September when school starts.
“There are a number of worrying signs,” says Stanford. In addition to inventory reductions at DaimlerChrysler, “all manufacturers are finding they need incentives to move the cars off the lots.” Even more unnerving, the heavy truck industry, traditionally a bellwether for the broader economy, “has seen a real downturn.”
Cycles or no cycles, it’s probably time to be a little scared. And not just the folks from Plant Six on maternity leave. Inventory adjustment doesn’t just mean layoffs. It means that fewer cars have to be built. Fewer cars means less steel, which means layoffs in that industry. Eventually, enough of us might get laid off to impact those other linkages. Laid-off people tend not to go to the mall or take weekend trips to Hogtown to see Dame Edna.
Don’t be surprised if you start seeing the ripples up where you live. It’s not like you weren’t warned.
