Expert: Close more plants

Automakers have gotten more than 70,000 hourly workers to voluntarily leave.

DETROIT FREE PRESS

DETROIT — The UAW, under pressure to accept massive health-care cuts or other concessions, will have a hard time winning promises of new work from Detroit automakers, which experts say still have too many plants in North America.

Even after announcing the closure of 30 factories and other facilities in the past few years, Detroit automakers will have to get the UAW to agree to close even more under a contract to replace the one that expires Friday, experts told the Detroit Free Press.

Erich Merkle, director of forecasting at IRN Inc. in Grand Rapids, Mich., said Detroit’s automakers must close the plants they don’t need as demand for cars and trucks falls.

The situation is less dire at Chrysler LLC, which has held market share better than Ford Motor Co. and General Motors Corp., he said.

But the problem remains.

“There’s still overcapacity,” he said. “As long as your market share is dropping, you’re going to have overcapacity.”

That’s especially true if the automakers and UAW can’t come to an agreement to move a substantial portion of the automakers’ roughly $100 billion liability for future health care costs off the companies’ balance sheets into a special union-managed trust — and at a significant discount.

“Let’s say that they were able to get the legacy costs off their books, that could change the game,” said Ron Harbour, president of Troy, Mich.-based Harbour and Associates.

What’s been done

All three automakers already have encouraged thousands of hourly workers — more than 70,000 in all — to voluntarily leave with generous buyout plans. Still, Harbour noted that “if they can’t do something that resolves a good chunk of the total cost, it has a huge influence.”

And more operations that seemed safe under recent turnaround plans could be at risk for closure or work reductions.

Those at risk, various experts told the Detroit Free Press, include GM’s SUV plant in Moraine, Ohio, where more than 2,000 workers build the Chevy Trailblazer and similar models, and Ford’s St. Thomas, Ontario, plant, where more than 2,400 workers build the Crown Victoria and similar models.

Chrysler is exploring the sale of Chrysler Transport — which employs fewer than 1,000 workers and has terminals in Detroit, Ohio and Canada — and certain parts-related operations, such as warehousing and packaging, though not the entire performance-oriented brand, the Detroit Free Press has reported.

With three turnaround plans in different stages, however, Detroit’s automakers entered contract talks with the UAW this year with varying abilities to amend their manufacturing plans.

GM’s 2005 turnaround plan, for example, named all 12 plants it intended to close in order to return to profitability.

Chrysler’s much smaller revival effort, announced in February, called for closing two facilities and trimming production at a few more.

But Ford’s Way Forward 2006 restructuring plan left a lot of details undisclosed, leaving a lot of room for negotiation at the bargaining table.