Nearly 1,400 auto workers in Belvidere, Illinois, will lose their jobs due to weak demand in China for the Jeep Cherokee.
Fiat Chrysler announced the elimination of the third shift at the Illinois plant in May. Layoffs are needed to "better align production with global demand". The company also reduced its sales outlook for 2019 due to slowing Chinese auto market.
The Cherokee sells well in the United States. Sales of the small SUV increased by 41% last year and continued to be strong in January. But Fiat Chrysler said it has seen a decline in global demand for the car.
The company would not say exactly where the decline in Cherokee sales has occurred, but its latest earnings report clearly shows that it suffers from the weakest sales in China.
Fiat Chrysler announced that its overall sales in the Asia-Pacific region plunged 28% last year, with an even larger decline in China. He is also confronted with increased competition, "particularly in the SUV segments," according to his results.
Fiat Chrysler builds the Cherokee at one of its two assembly plants in China.
But Fiat Chrysler and other automakers do not want to reduce the output of their factories in China, should growth pick up soon, said automotive analyst Rebecca Lindland.
Chinese factories also have lower wages than those in the United States and Europe. So it makes sense for Fiat Chrysler to maintain some of its production in China. Rather than shipping Cherokees from Illinois to other markets, Fiat Chrysler can ship the SUV from the factory in China.
George Welitschinsky, president of the local United Auto Workers union of Illinois, said the builder was building about 1,200 cars a day last year and that it is now reduced to 830 a day, mainly because of falling exports. He said most of these exports were destined for Europe, which, in his opinion, is now supplied by China.
"There is a lot of confusion and worry," he said of the loss of the job. "No one likes being laid off."
Fiat Chrysler has also had good news for auto workers this week. He announced that he would turn a closed engine plant in Detroit into a new Jeep assembly plant. This investment and other investments announced Tuesday will create 6,500 additional jobs in Michigan.
Some of the dismissed Illinois workers will have the right to switch to these new jobs, but the first of these jobs will only be available by the end of next year.