Fiat Chrysler to Lay Off 1,300 Workers in Michigan, Investing More on Light Truck Productions

By Staff Writer

Apr 08, 2016 06:56 AM EDT

Italian-American automaker Fiat Chrysler Automobiles announced that it would lay off 1,300 workers at its Michigan factory. According to the company, the cutback is triggered by a sharp decline in demand for cars. It would be the company's first large-scale job cuts since 2009, where it emerged back from bankruptcy.

The announcement, released on Wednesday, stated that the cutback will be effective July 5. The lay off would affect 1,300 workers, which is about 41 percent of the Michigan factory's hourly workforce. The decision will affect workers at the company's Sterling Heights plant in Michigan, and also 120 other workers at a nearby supporting factory.

The automaker's Michigan plant is where it manufactured the mid-size sedan Chrysler 200. According to IBT, Fiat Chrysler will roll back production of the sedan due to weak sales. The model, popular with car-rental agencies in the U.S., has been seeing a drop in sales for as much as 63 percent in the year's first quarter compared to the same period last year.

Last month, reports revealed that 57 percent of vehicles purchased in the U.S. were from the light trucks category, a trend most likely driven by cheap gasoline. Fiat Chrysler's CEO Sergio Marchionne had previously stated in January that the company's sedan model, Dart and Chrysler, could be phased out if the company doesn't manage to find a production partner.

The company picked up with the trend that American car buyers turn to SUVs and pickups over sedans for various reasons, including lower gas prices. The Wall Street Journal reports that Mr. Marchionne has allocated $1 billion to adjust the company's U.S. manufacturing to the changes.

The Michigan factory, where the lay off is taking place, is expected to be a pickup truck or SUV factory. The models have not yet been disclosed. According to CNN Money, the company's Michigan factory has been shutdown temporarily since February 4 and is not due to reopen until Monday. The company said that it will place laid off workers in open positions at other Detroit-area factories.

In 2015, car sales in the U.S. hit a record and continued to climb. As a result of car sales growth, the jobs in the sector has grown as much as 260,000 new jobs in the last six years. However, recently, automakers are still struggling to make money on car models other than truck.

Fiat Chrysler is shifting its focus to produce more light trucks and SUVs, and pulling down on the sedan models which has lost their buyers. Consequently, the company is laying off 1,300 workers from its factory that had been producing the Chrysler 200 model in Michigan.

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