The next day, about 200 Textron Automotive Co. Inc. salaried employees were told their jobs were eliminated as part of a cost-cutting effort related to reduced auto production.
There is no conflict at play, just hard reality in a post-Sept. 11 world where carmakers cut financing costs to boost sales of inventory yet expect production to drop.
And the cuts at Textron Automotive in Troy, Mich., were miniscule compared with what has been happening at other suppliers through the fall. TRW Inc. of Cleveland said Oct. 16 that it would slice 2,400 jobs from its automotive unit.
Dana Corp. of Toledo, Ohio, followed that a day later, saying it would cut 11,000 jobs - or 15 percent of its global work force - in addition to the 10,000 positions it has eliminated during the past 18 months.
October's car sales, analysts say, are the exception, not the rule of doing business this year.
"While global economic conditions had already shown signs of weakening, given the events following Sept. 11, we now face the prospect of a further significant decline in our markets," Joe Magliochetti, Dana CEO, said in a news release. "These extraordinary circumstances necessitate extraordinary actions to secure the long-term competitive position of the company."
Production downWhile nearly every domestic carmaker posted sales records in October, analysts believe those numbers were bolstered only by the 0 percent financing nearly every company is offering. Once the special deals end this month, so will the sales.
In addition, the bulk of the vehicles sold already were in inventory and not new products turned out since September.
General Motors, for instance, sold 554,652 cars and trucks in October, boosting sales 31 percent compared with a year earlier. But total production actually dropped for the month, with 485,500 vehicles made compared with 527,000 in October 2000.
"There is a reduction in production volume," said Textron spokesman Tim Weir. "We couldn't continue to ignore the reduction in production volume expected for both the fourth quarter and for the coming year."
The cuts of Nov. 2 for Textron affect only salaried employees, with a little less than 10 percent of the salaried work force taking a hit.
Some hourly shifts have gone through temporary layoffs related to shutdowns at auto plants they supply.
The number of those shutdowns is expected to grow through the coming weeks and into the first months of 2002, said Jeff Schuster, senior manager for North American forecasting at J.D. Power and Associates.
"That's the theme that's echoing around the supplier base," he said. "Everybody is planning for the worst-case scenario, and if things get better, then they'll increase the work force."
The industry already went through one massive inventory adjustment in 2001, as automakers closed assembly plants for days and weeks because of an oversupply of new vehicles during the first quarter. They are now going through the same series of closures to correct the inventory levels to avoid more shutdowns at the start of next year, he said.
Mortgaging the future?The biggest concern is whether carmakers have borrowed too many future sales through 0 percent financing - prompting consumers who normally would have bought a car in 2002 or 2003 to buy early.
Schuster expects to see a huge drop in sales at year end as the special offers expire. "What certainly will happen, especially in December, is we'll see the floor fall out of the sales at the end of this year," he said. "There is a risk that some of the sales have been pulled into this quarter."
Despite that, Schuster expects production levels to remain flat for the rest of 2001 and early 2002, with the first signs of recovery in the second half of 2002. He is forecasting North American production of 15.5 million vehicles this year and 15.6 million to 15.7 million vehicles in 2002. In 2000, the North American industry made 17.4 million cars and trucks.
Despite those fears, there are some companies that are managing well, even increasing production as vehicles are introduced, says consultant Jeff Mengel, a partner with Plante & Moran LLP of Auburn Hills, Mich., an accounting firm. But those are the exception.
Most companies, especially smaller Tier 2 and Tier 3 suppliers, are just doing their best to position themselves for any anticipated cutbacks.
Said Mengel: "There is no question there is a definite hypersensitivity to scheduling. People are in a position to cut first and not plan on any increases going forward. They are going to have to be extremely responsive to ride the wave."