2,800 Jobs To Be Slashed As Auto Parts Maker Close Factories

Anthony Fontanelle
May 3, 2007

The auto industry has witnessed the problems faced by the U.S.’ Big Three and how such a situation has forced these companies to slash down jobs. The Ford Motor Company, General Motors, and the Chrysler Group have been implementing restructuring plans in a bid to upset the loss they have incurred the past couple of years or so. These companies’ restructuring plans includes workforce reduction and the closing down of assembly plants as well as reducing working hours on some facilities. This occurrence has been a big blow to the state of Michigan where the three biggest American car manufacturers reside. More recently, a new blow to the state comes when auto parts maker ArvinMeritor Inc. announced that they have incurred substantial losses in the past fiscal year and therefore will be closing down 13 plants which will result to cutting down 2,800 jobs.

The company reported that the 13 plants that they are forced to shut down are located in North America and Europe. In Europe, the company will be closing down four plants while the remaining nine facilities that will be closed are located in North America. The company reported that this restructuring plan in the face of financial difficulties will be using up an estimated $325 million. So far, ArvinMeritor has only named one plant that it will close down in the near future. The company based in Troy, Michigan announced that their assembly plant located in Frankfurt, Germany will be closed down. Currently, the company has about 27,500 employees working on their more than 110 production facilities all over the world.

While the company will be cutting down jobs, they have also announced that they will be creating jobs on what the company calls “low-cost sites”. This is done to reduce the money that the company will have to shell out for the wages of their employees. The auto parts manufacturer announced that they will be creating approximately 800 jobs in Mexico and in some countries in Eastern Europe. This strategy is being used by companies to take advantage of the growing globalization. With countries offering incentives and lower wages, companies are exploiting this situation to help them get back on their feet financially. The announcement came after the company announced that they have lost $94 million for the second quarter of the fiscal year. The said figure is a far cry from the $45 million profit that the company has gained for the same period last year.

Aside from closing down plants and workforce reduction, the company also announced that they will be freezing the company’s pension plan for U.S. employees. The said measure will be effective by January 1st next year. The said step is expected to affect at approximately 3,800 American employees. Employees who expect to get additional benefits until June 30, 2011 will be affected adversely by the said step taken by the company. While the company will be freezing pension plans, they will increase their contributions to the savings plan of their workers. This step is a necessary one to appease workers who depends on the pension plans that the company will soon be putting on hold indefinitely.

With the auto industry facing a change in trend, it is expected that it will affect not only car companies but also other companies involved in the production of automotive components such as brake parts which can be found at Active Brakes Direct. With ArvinMeritor closing down plants and freezing pension plans for American workers, it would be a big blow to the American auto industry. But with a competent restructuring plan, the company is expected to get back to profitability as Ford, General Motors, and Chrysler are expected to do.

Source:  Amazines.com