Layoffs, Plant Closures Become Norm For Auto Industry

Chrysler's restructuring is good news for parts suppliers in the long run, but layoffs, plant shutdowns and consolidation will be the norm until the industry stabilizes, suppliers say.

TORONTO (CP) -- Chrysler's restructuring under U.S. bankruptcy protection is good news for its parts suppliers in the long run, but layoffs, plant shutdowns and consolidation will be the norm until the industry stabilizes, suppliers say.

Rob Wildeboer, executive chairman of Canadian parts supplier Martinrea International Inc., said his company will be forced to temporarily lay off workers while Chrysler ceases production during its restructuring. Chrysler is one of Martinrea's top four customers.

"Any time you have a shutdown, what it means is you have to adjust your plant capacity on a quick basis," Wildeboer said in an interview Friday.

"What's going to have to happen is that those plants that have significant Chrysler work will adjust the workforce for that timeframe."

Chrysler LLC said Thursday it will shut down all of its U.S. plants for 30 to 60 days while it completes a technology-sharing alliance with Fiat -- a cornerstone of its restructuring plan.

And while Chrysler Canada is not involved in the bankruptcy filing and its plants will not officially be shut down, many of its parts suppliers have ceased production along with its U.S. plants, forcing Canadian plants to close as well.

Canadian Auto Workers president Ken Lewenza said Thursday that Chrysler's Canadian plants will continue to operate until they run out of parts, but he expects that to happen "almost immediately."

Martinrea has 10 Canadian plants, all in southern Ontario, and employs 4,400 people worldwide. It is one of many Canadian auto parts suppliers that will be affected by Chrysler's restructuring, including Magna International Inc. and Linamar Corp.

Wildeboer said the company will also be adjusting to General Motor's announcement that it will shut down 13 of its U.S. plants for nine weeks in the summer as part of its own restructuring process.

"I would imagine that the second quarter, which is the April to June timeframe, is a period of adjustment for a lot of suppliers, and we'll do that on a plant-by-plant basis, a region-by-region basis," he said.

Bill Pochiluk, president of industry adviser AutomotiveCompass, said the unexpected shutdowns announced by both Chrysler and GM are making what was already an extraordinarily difficult period for suppliers "catastrophic."

"If we're talking about almost a universal shutdown of Chrysler for 30 to 60 days, that has enormous bad cash flow implications for suppliers, and we suspect that suppliers particularly dependent on Chrysler will have some trouble financing their operations in the near term and some will be inclined to basically call it a day," he said.

The number of jobs lost at Chrysler and General Motors will pale in comparison to the fallout as the parts industry consolidates.

Gerry Fedchun, president of the Automotive Parts Manufacturers' Association, said it's impossible to guess how many jobs will be lost in the Canadian supplier industry, but it's widely estimated that every one job lost in an assembly plant leads to a total of seven jobs lost in the economy as a whole.

"It is this huge spider web," Fedchun said, adding that there's no doubt some Canadian auto parts companies will go out of business as Chrysler and GM restructure.

"There's just so little cash now in the system that some people are not going to make it," he said. "I can't tell you which ones, I just know it has to happen because things are so bad."

Export Development Canada said last month it will provide $700 million in receivables guarantees to insure parts manufacturers against non-payment from troubled automakers.

But Fedchun said that won't be enough to help suppliers when the automakers simply aren't making cars, and called on the government to provide direct financial assistance to the industry.

The auto parts industry employs approximately 79,000 Canadians and is largely based in southern Ontario.

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