Big Losses Underscore Bigger Problems at Chrysler

February 29, 2008
Article Image

Chrysler LLC was forced to shut down its key minivan assembly plant in Windsor, Ont. Thursday only hours after the Canadian Auto Workers struck a plant belonging to TRW Automotive.

The TRW plant supplied suspension frames for Chrysler's new minivans – one of the automaker’s most profitable models. And the situation could soon get worse. Chrysler also is facing the potential shutdown of its pick-up truck production in the next few days due to parts shortages created by a strike at American Axle and Manufacturing Holdings Inc. in Michigan and New York. That walkout has already forced GM to close an assembly plant, in Pontiac, Michigan.

CAW officials said the negotiations to establish a collective-bargaining agreement at the TRW plant fell apart on economic issues. Employees on average earn $11.25 which is significantly lower than the average manufacturer in the province of Ontario, said Ken Lewenza, the president of CAW :Local 444. "(The) CAW is making preparations for a lengthy strike but has advised the TRW management team that they are available day and night if constructive negotiations can commence for the purpose of bargaining a reasonable resolve," said Lewenza's whose local also represents workers employed at the Windsor minivan plant.

The labor unrest come on the heels of various reports that Chrysler LLC lost about $2.9 billion last year, much of that during the two months after what was then DaimlerChrysler AG sold controlling interest in the U.S. automaker to the New York-based private equity firm, Ceberus Capital Management, Key dealers came from a report the German automaker filed with the U.S. Securities Exchange Commission, with subsequent details uncovered by the Detroit Free Press. The figures for the period from Aug. 4, 2007 to Sept. 30, was calculated under international financial reporting standards used in Europe but not in the United States, Daimler said.

The net loss also includes about $466 million in expenses booked during the fourth quarter of 2007, related to the ongoing restructuring of Chrysler and to the company's new four-year contract with the United Auto Workers, Daimler said in the annual report it filed with the SEC.

There may be good news in bad news. Maybe. Analysts have said that Chrysler sales have declined so sharply during February the disruptions created by the supplier strikes in Canada and the U.S. are unlikely to have any immediate impact on the company's finances. However, if the walkouts drag on for any length of time they could have a serious impact on the company's cash flow and very likely will increase pressure on Chrysler's management to trim the company's model line-up, which has run into some intense opposition from dealers around the U.S.

Chrysler CEO Robert Nardelli has said recently that Chrysler has ample reserves to ride out a standard size recession but would have to make broader cuts in order to survive if economic conditions got worse. By Joseph Szczesny

The Car Connection
See the winners »
The Car Connection
Commenting is closed for this article
Ratings and Reviews
Rate and review your car for The Car Connection
Review your car
The Car Connection Daily Headlines
I agree to receive emails from The Car Connection. I understand that I can unsubscribe at any time. Privacy Policy.
Thank you! Please check your email for confirmation.