Labour
Truck Sales Plunge, As Does Employment
By Charley Hannagan, Post-Standard 5/7/08
Jul 8, 2008 - 9:24:14 AM

The 250 workers laid off Thursday by New Process Gear likely will not be the last. Additional layoffs are expected in the months to come, Magna Powertrain U.S.A. Inc. President Gregory S. Deveson said in a letter to employees dated Wednesday.

The plant makes drivetrain parts for sport utility vehicles and pickup trucks, both of which are selling poorly as consumers wary of high gas prices shun those vehicles in favor of more fuel-efficient cars.

"We are not competitive at the reduced volume levels we are seeing and it is imperative that we enact comprehensive initiatives to improve efficiency, reduce costs and improve our operations dramatically," Deveson wrote.

Company officials said in March that they wanted to pare the number of jobs from 2,300 to 1,800 by the end of this year.

New Process Gear workers knew eventually job cuts would hit them.

"That's what happens when the economy turns down," said Ed Lauricella, 42, of West Monroe, who has worked at the plant for 20 years and was not laid off.

"It all has to do with the price of gas," he said Thursday as he drove away from the plant.

New Process Gear already had planned a routine one-week shutdown beginning Monday.

Machine operator Henry Todeschini, 49, of Chittenango, said his department, which supplies parts to a transmission plant in Indiana, was told it would be out of work an extra week. However, Todeschini said he heard before leaving work Thursday that his department may get a call extending its layoff.

The new contract the United Auto Workers signed with Magna in February eliminated a company-paid supplement to the money workers receive from state unemployment compensation, he said.

"Trucks ain't selling -- what are you going to do?" Todeschini said, taking a pull on his beer at McShane's Restaurant on Kinne Street in East Syracuse, where he'd gone after work.

Officials for UAW Local 624, which represents production workers at New Process Gear, were at the plant Thursday and unavailable for comment.

New Process Gear makes powertrain parts for four-wheel- and all-wheel-drive vehicles. The plant's customers -- Ford Co., General Motors Corp. and Chrysler LLC -- have cut production of the pickups and SUVs which use those parts. General Motors, for example, announced last month that it was closing four truck and SUV factories and cutting 8,000 jobs.

SUV sales going downhill fast

"Market conditions are declining with unprecedented speed, and continue to defy predictions," Deveson said in his letter.

New Process Gear rode the SUV craze in the 1990s like a Jeep scaling a mountain road, with production volumes rising ever higher. The company couldn't keep up with demand for the parts that went into Jeep Grand Cherokees, Dodge Durangos and Ford trucks. Employees worked long hours with a heaping side of overtime. At its peak, the plant employed 4,000 workers.

With Thursday's announced layoff, the work force will be down to 2,050.

Magna has sought to cut the work force and wages to make the plant more competitive.

The new contract approved by UAW Locals 624 and 2149 included incentives for workers to retire early or voluntarily leave. Other workers took an option to transfer to their former employer, Chrysler. Workers who stayed at New Process Gear receive $87,500 over the four-year contract to ease them into lower wages.

In an interview earlier this year, Deveson laid out his goals for a turnaround at the plant. A lower cost structure will put the plant in a position to competitively bid on new business with more customers, including Asian car makers, he said.

Even as the plant cut jobs this week, Deveson told workers the company will move forward on new products for smaller cars, electric and hybrid vehicles.

"We are investing in our new business development and engineering efforts in order to realize the diversification of products and customers that are critical to our long-range success," Deveson wrote.

The company wants to capture new business in all-wheel-drive axle subsystems, components, transfer case and chassis systems that represent an approximately $1 billion opportunity for the company through 2012, he wrote. Being part of Magna, a global automotive supplier with $26.1 billion in sales last year, positions New Process Gear to earn a share of that new business, "which will be essential to a profitable future," Deveson said.

Magna remains committed to investing more than $40 million in the facility, and has accelerated the timetable for modernizing the plant and buying new equipment, Deveson said. That work will be done next year, instead of 2010, he said.

"It's usually good for the workers to see that kind of investment in their plants. That's usually a good sign," said Bruce Belzowski, assistant research scientist at the University of Michigan Transportation Research Institute's automotive analysis division.

An investment in a plant is no guarantee of a company's future intentions, he said. Chrysler, for example, recently invested about $300 million in a St. Louis plant that it now plans to close, Belzowski said.

Magna and UAW officials met with state and federal legislators earlier this year to ask for assistance with New Process Gear's plans.

State pledges $39M to modernize plant

The governor and the state Legislature this year set aside $39 million to be paid out over three years to help Magna modernize its DeWitt operations and maintain its local work force. The Senate, the Assembly and the executive branch each will supply one-third of the money.

Magna has not yet submitted formal applications for the state money, which will be given only if the company undertakes a significant retooling of the plant, said Assemblyman William Magnarelli, D-Syracuse.

Sen. John DeFrancisco, R-Syracuse, said state officials will expect Magna to maintain a significant work force in the Syracuse area.

"It seems to me that the commitment was clearly to maintain a work force here, and if they're not going to be able to do that, then I would think that (funding) commitment would not materialize," DeFrancisco said.

Officials from Empire State Development Corp., which will supply the $13 million secured by Gov. David Paterson, are discussing the terms of that funding with Magna now, said Stefanie Zakowicz, a Empire State Development spokeswoman.

Depending on the outcome of those talks, the amount of funding could increase or decrease, Zakowicz said.

"Things change," Zakowicz said. "Did anyone forecast that between the time that budget was enacted and now that there would be a 40 percent drop-off in sales of four-wheel-drive vehicles and trucks? I don't think so. So is that $13 million still a realistic number?"



Source: Ocnus.net 2008