Almost 1,400 car manufacturers in Belvidere, Illinois, will lose their jobs due to weak demand in China for Jeep Cherokee.
Fiat Chrysler announced that it eliminates the third shift at the factory in Illinois in May. It said the layoffs are needed to "better align production with global demand." The company also reduces sales prospects for 2019 due to the decline in the Chinese car market.
Cherokee sells well in the US. Sales of the small SUV were up 41% last year and continued to be strong in January. But Fiat Chrysler says it has seen a decline in global demand for the car.
The company would not say exactly where the rejection of the Cherokee sales occurred, but the latest earnings statement showed that it has the largest sales failure in China.
Fiat Chrysler reported that its total sales in the Asia Pacific region were 28% last year, with even greater decline in China. There is also increased competition there, "especially in the SUV segments," according to the income statement.
Fiat Chrysler builds Cherokee at one of its two assembly facilities in China.
But Fiat Chrysler and other automakers will not cut production at their factories in China in case the growth resumes there soon, said Rebecca Lindland, an auto analyst.
The Chinese plants also have lower salaries than those in the US and Europe, so it makes sense for Fiat Chrysler to keep some production in China. Instead of sending Cherokees from Illinois to other markets, Fiat Chrysler can send SUVs from the China factory instead.
George Welitschinsky, president of United Auto Workers local union at the Illinois factory, says it built around 1,200 cars a day last year, and goes down to 830 a day now, mainly due to the decline in exports. He said most of these exports were to Europe, as he said he now delivers from China.
"There is much confusion and concern, "he said about the loss of the shift. "No one likes to be laid off."
Fiat Chrysler also had good news for car manufacturers this week as well. It announced that it would convert a closed engine factory in Detroit to a new factory for Jeep. There and other investments announced on Tuesday will add 6,500 jobs in Michigan.
Some of the depreciated Illinois car dealers will be entitled to transfer to the new jobs, although the first of these jobs will not be available until late next year.