Fresh evidence that the domestic auto industry is sliding into a recession came on Friday, when Chrysler Corp. announced that it was laying off more than 4,000 workers in three states and permanently closing its oldest assembly plant in the heart of Detroit.
Chrysler said in a statement that the cutbacks were in response to the "continued deterioration of the U.S. auto market, and to fierce competition in the marketplace."
In fact, Chrysler's actions are just part of this year's massive retrenchment in Detroit, as the domestic auto makers come face to face with the brutal facts of life heading into the 1990s: The Japanese are coming on stronger than ever.
"Chrysler's announcement is no surprise . . . all of the U.S. auto makers are going to be going through a tough period where they will have to trim costs," said Cynthia Certo, an automotive analyst with Integrated Automotive Resources, a Wayne, Pa., automotive market research firm.
The severity of Detroit's problems were underlined Friday, when October car sales were released, showing steep, double-digit declines for the Big Three. General Motors Corp. said its sales fell by nearly 19% for the month; Chrysler's slid nearly 13%, and Ford Motor Co.'s fell by almost 12%. In response, the Big Three have been forced into yet another round of Draconian cost cutting, grimly reminiscent of the early 1980s.
Just this year, General Motors has closed two assembly plants and has announced that at least two others are likely to be closed at the end of the 1991 model year. It has scaled back production at most of its plants and now has 12,000 workers on temporary layoff and 38,000 others on "indefinite," or permanent layoff.
Ford has yet to close any of its domestic plants permanently but has sharply curtailed production at most of them throughout the year. On Friday, Ford said it would briefly idle its Mustang assembly plant in Dearborn, Mich., and one of its truck plants in Louisville, Ky., and would temporarily drop one shift at its Lorain, Ohio, van plant.
Chrysler, which has been frantically cutting costs in recent months in order to avert a repetition of its financial crisis of the early 1980s, said Friday that it will close its Jefferson Avenue assembly plant in Detroit and lay off the factory's 1,700 hourly workers.
The factory, built in 1907, is one of the oldest auto plants in the nation, and its location close to downtown Detroit has long made it a visible symbol of Detroit's close ties to the auto industry.
In addition, Chrysler said that it will cancel the second shift at a St. Louis assembly plant, laying off 1,900 hourly workers there.
Chrysler said also that it will close a parts plant in Coleman, Wis., that it inherited when it acquired American Motors two years ago, eliminating another 400 jobs.
The auto cutbacks are starting to have an impact on the unemployment rate: Michigan, the most auto-dependent state in the nation, said Friday that its jobless rate had risen to 8.2%, the highest rate for any of the nation's large industrial states. Nationally, the Bureau of Labor Statistics said that the weakness in the auto industry was largely responsible for the softening job picture in the nation's manufacturing sector.
Meanwhile, with the closing of the Detroit plant, Chrysler announced also that it will discontinue the 12-year-old, slow-selling Dodge Omni and Plymouth Horizon subcompact models built there. The aging Omni-Horizon models were Chrysler's smallest and most fuel-efficient cars and had helped Chrysler meet federal mileage standards.
Chrysler had hoped to keep the twin cars alive for at least two more years, but they were no longer competitive against the modern subcompacts now coming from Japan.
The Chrysler layoffs in the St. Louis car plant occurred only one day after Chrysler workers at a nearby mini-van plant voted down a plan to expand production through the use of an experimental four-day workweek with 10-hour days.
Chrysler said that many of the workers laid off Friday could have moved to the mini-van facility if workers there had accepted the four-day workweek. Although the innovative labor agreement would have created new jobs in the factory, the current workers turned it down because they would have lost overtime pay.