Stellantis NV is cutting nearly 1,700 jobs at its Jeep Cherokee plant in Illinois, the transatlantic automaker said on Friday, the latest example of how the global semiconductor shortage is affecting the industry with lasting consequences.
The carmaker is reducing shifts at the Belvidere Assembly Plant from two to one until July 26. The move, which aims to “balance sales with production”, will lay off 1,641 indefinitely employees who manufacture the compact crossover, Stellanti’s spokeswoman Jodi Tinson said in a statement. notes that the semiconductor shortage has “further aggravated” the situation.
“The company will make every effort to place laid off hourly employees in open full-time positions when they become available based on length of service,” Tinson added.
Bloomberg was the first to report on the redundancies. The facility employs 3,374 hourly and 206 salaried employees, according to Stellanti’s website.
Belvidere has been idling since the end of March and was also down for a week in February due to the lack of chips used in consumer electronics, including vehicle automated driving functions, infotainment systems and heated seats.
The Illinois plant will not be up and running next week either and has lost production of more than 67,000 vehicles, according to estimates by AutoForecast Solutions LLC. The consulting firm AlixPartners LLP reports that the automotive industry could lose a total of $ 110 billion this year due to the chip shortage.
“I think carmakers at this point will need to make tough decisions where they can,” said Jessica Caldwell, CEO of Insights at car information website Edmunds.com Inc. “It’s not like it’s a subcompact car that is die out… There is a rebalancing of dealing with the current situation. It is a different year than they had imagined when they originally made these product plans. “
Demand for cars has recovered faster than car manufacturers’ ability to recover from the pandemic-induced shutdowns last spring, a situation that has been exacerbated by the chip shortage. Cherokee sales fell by 29% compared to the previous year 2020 compared to the decrease of 14% in total for the Jeep brand. The first quarter of this year was brighter, with Cherokee sales up 13%.
Still, the crossover market is competitive with newer offerings such as Ford Motor Co.’s Bronco Sport, Hyundai Santa Fe and Kia Sorento getting attention, says Sam Fiorani, AutoForecast Solutions’ forecast manager. Cherokee has undergone few changes since the debut of the 2014 model.
“The extreme competition in crossovers has made it a tight market for the Cherokee,” he said. “And the bowl on the semiconductor issue, production at Belvidere has been on the bubble for a whole year.”
Even before the pandemic and chip shortage, Belvideres’ workforce and production declined. Prior to its merger with French carmaker Groupe PSA, Fiat Chrysler Automobiles NV cut the third shift and 1,300 jobs at the plant in February 2019. In February, Stellantis laid off another 150 employees.
But Stellantis said it would not close Belvidere during the 2019 labor negotiations with the United Auto Workers union, which did not immediately comment on the latest layoffs on Friday afternoon. The contract includes $ 55 million in investments in the Cherokee plant and new models on the same platform, although the carmaker has not formally shared these plans.
Representatives of UAW Local 1268, which represents factory workers, could not be reached for comment Friday afternoon.
Stellantis has begun to make some changes in its business since its merger to become the world’s fourth largest carmaker closed in January. IF spread its SRT performance division into the engineering departments of its vehicle brands, although the company confirmed that it will continue to produce SRT-branded Dodge vehicles and other high-speed trucks and SUVs. That decision did not contain dismissals.
Stellanti’s CEO Carlos Tavares said in January that the transatlantic interconnection offers the geographical footprint and size to be a “shield” against redundancies as the industry undergoes a transformation towards automated, connected and more expensive electrified vehicles that require billions of dollars in capital.
Industry analysts and those who have worked with Tavares have said that he is known as a fair cost reducer and is a professional in management and increased manufacturing efficiency.
“There are many more things to do than just cut jobs” to save money, Tavares said at the time. “Eventually, there are moments you can not avoid it, but there are many more things to do.”