Profits up, but Chrysler cuts

FENTON, Mo. — An autoworker who is a member of the Missouri Legislature says Chrysler’s announcement that it is gutting 1,300 jobs from its South Assembly Plant here has “more to do with the bargaining climate than with the car sales.”

State Rep. John Bowman (D-St. Louis), a 30-year United Auto Workers union member from the Fenton plant, says that with the union engaged in national contract negotiations this year, the automaker wants “to get rid of high-seniority workers through attrition, buyouts and layoffs.”

Chrysler’s announcement laid out a three-year restructuring plan that will eliminate 13,000 jobs nationwide by 2009. Chrysler stocks jumped $5.33 cents per share, to $69.78 after the cuts were announced.

The South Assembly Plant, which currently has two shifts, makes Chrysler minivans and employs about 2,300 people. It is about 20 miles southwest of St. Louis.

The auto giant says it lost $1.5 billion in revenue last year, but reports on earnings on shares tell a different story. Chrysler shares earned $4.26 billion, or $4.17 per share, in 2006, compared to $3.76 billion, or $3.70 per share, in 2005. In other words, Chrysler made around $760 million more in profits last year, compared to the year before.

Chrysler’s parent company, DaimlerChrysler, posted operating income of $7.28 billion last year, up from $6.84 billion in 2005. And former Chrysler Chairman Robert J. Eaton received a personal compensation deal worth $70 million when he sold Chrysler to the German auto manufacturer.

“These layoffs are horrible,” said Bowman. “What happened to Chrysler’s commitment to the state and local community?” he asked.

In December 2005, in exchange for tax breaks, Chrysler said it would invest $1 billion in its Fenton plants. Local community and political leaders have suggested that the tax breaks could be repealed.

The layoffs “will devastate the local economy,” Bowman told the World.

Missouri Progressive Vote Organizer Margarida Jorge cited Chrysler’s desire to push health care costs onto workers. “These layoffs also have a lot to do with our broken health care system,” she told the World. “If we had a national health care plan, like HR 676, Chrysler couldn’t use health care as a bargaining chip.”

Chrysler said it wants to cut its $2.3 billion annual health care bill before it begins contract negotiations with the UAW this spring. Current health care costs are passed on to consumers and, the company claims, add about $1,000 to the price of every new Chrysler car. Of course, cutting the company’s costs may help its profits picture, but observers agree that consumers are unlikely to see any drop in car prices.

Retired workers and their families account for two-thirds of Chrysler’s health care outlays. Toyota, Honda and Nissan, nonunion carmakers who are relative newcomers to the U.S. manufacturing scene, don’t have these “legacy costs.”

Chrysler’s restructuring plan includes increasing sales and manufacturing operations in countries in Europe and Asia. The existence of government health care plans in these countries significantly reduces auto production costs there. Chrysler is currently the fifth largest carmaker in the world. It sold 2.7 million vehicles last year, mostly in North America.

Chrysler has cut 40,000 jobs since 2001 and closed 16 plants. The current round of job cuts will affect plants in Michigan, Ohio, Indiana, Delaware, Missouri and Ontario, Canada.

tonypec @ cpusa.org