Stellantis NV is cutting almost 1,700 jobs at its Jeep Cherokee plant in Illinois, the transatlantic automaker said Friday, the latest example of how the global semiconductor shortage is affecting the industry with lasting implications.
The automaker is reducing shifts at Belvidere Assembly Plant from two to one by July 26. The move, which seeks to “balance sales with production,” will indefinitely lay off 1,641 employees making the compact crossover, Stellantis spokeswoman Jodi Tinson said in a statement, noting the semiconductor shortage has “further exacerbated” the situation.
“The Company will make every effort to place laid off hourly employees in open full-time positions as they become available based on seniority,” Tinson added.
Bloomberg was first to report the layoffs. The plant employs 3,374 hourly and 206 salaried workers, according to Stellantis’ website.
Belvidere has been idling since late March and was down for a week in February, as well, because of the shortage of chips used in consumer electronics, including vehicles’ automated driving features, infotainment systems and heated seats.
The Illinois plant will not be running next week either and has lost production of more than 67,000 vehicles, according to estimates from AutoForecast Solutions LLC. Consulting firm AlixPartners LLP reports that in all, the auto industry could lose $110 billion this year because of the chip scarcity.
“I think at this point automakers are going to have to make tough decisions where they can,” said Jessica Caldwell, executive director of insights at auto information website Edmunds.com Inc. “It’s not as if it’s a subcompact car that is dying off. There’s a rebalance of dealing with the situation at hand. It’s a different year than they envisioned when making these product plans originally.”
Auto demand has been recovering more quickly than the automakers’ ability to rebound from the pandemic-induced shutdowns last spring, a situation that has been exacerbated by the chip shortage. Cherokee sales fell 29% year-over-year in 2020 compared with the 14% drop overall for the Jeep brand. The first quarter of this year was brighter, with Cherokee sales increasing 13%.
Still, the crossover market is competitive with newer offerings like Ford Motor Co.’s Bronco Sport, the Hyundai Santa Fe and the Kia Sorento gaining attention, said Sam Fiorani, AutoForecast Solutions’ vice president of forecasting. The Cherokee has undergone few changes since debuting for the 2014 model year.
“The extreme competition in crossovers has made it a tight market for the Cherokee,” he said. “And pile on the semiconductor issue, the production at Belvidere has been on the bubble for a whole year.”
Even before the pandemic and the chip shortage, Belvidere’s workforce and production were shrinking. Prior to its merger with French automaker 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 2019 labor talks with the United Auto Workers union, which did not immediately have comment on the latest layoffs Friday afternoon. The contract includes $55 million in investment into the plant for the Cherokee and new models on the same platform, though the automaker has not formally shared those plans.
Representatives at UAW Local 1268, which represents the plant’s workers, could not be reached Friday afternoon.
Stellantis has begun to make some changes to its operations since its merger to become the world’s fourth largest automaker closed in January. In F, it dispersed its SRT performance division into the engineering departments of its vehicle brands, though the company confirmed it will continue to produce SRT-branded Dodge vehicles and other high-speed trucks and SUVs. That decision did not include layoffs.
Stellantis CEO Carlos Tavares in January said the transatlantic tie-up offers the geographic footprint and size to be a “shield” against layoffs as the industry undergoes a transformation toward 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 he is known as a fair cost-cutter and is a pro in management and boosting manufacturing efficiencies.
“There are many more things to do than just cutting jobs” to save money, Tavares said at the time. “Eventually, there are moments you cannot avoid it, but there are many more things to do.”
bnoble@detroitnews.com
Twitter: @BreanaCNoble