Chrysler, 30% owned by Italy’s Fiat SpA (FIATY), has shifted the summer shutdown of three U.S. plants from July to June due to shortage in parts supply on the back of earthquake and tsunami in Japan on March 11 that damaged many parts supplying companies’ plants.
With this, the Detroit-based automaker will provide more time to the parts supplier to resume production at their plants or come up with alternatives for manufacturing the parts.
The production shift will affect a pickup truck plant in Warren, Michigan and assembly plants in Toledo, Ohio and Toledo Supplier Park. The Warren and Toledo plants will be idled for the weeks of June 20 and 27 instead of July 11 and 18 while Toledo Supplier Park plant will be closed for the week of June 20 instead of July 11.
The Warren plant manufactures Ram 1500 and Dakota pickup trucks, while Toledo North produces Jeep Liberty and Dodge Nitro small sport utility vehicles. The Toledo Supplier Park factory manufactures chassis and body parts for the Jeep Wrangler.
Nearly every major automaker, including Toyota Motor Co. (TM), Honda Motor Co. (HMC) and Nissan Motor Co. (NSANY) in Japan and General Motors Co. (GM) and Ford Motor Co. (F) in the U.S. are plagued by the natural disaster in the country. They have either suspended or cut down their production in the wake of plant outages and parts supply shortage.
The shortages will mostly affect supply of fuel-efficient lineups that are highly demanded at the time when gasoline prices hit $4 per gallon in the U.S. As a result, car buyers may need to shift to alternative brands or postpone their purchases for some time.
Recently, Fiat announced that it can raise its ownership stake in Chrysler Group LLC up to more than 70% after repayment of government loans and exercising options. Chrysler owes about $7.5 billion in loans to the U.S. and Canada governments. It intends to repay the loans by June this year.
Soon after acquiring the majority ownership, Fiat expects to appoint the majority of Chrysler’s board of directors and can direct the timing of events, including a possible initial public offering (IPO).
In the first quarter of 2011, Chrysler posted a profit of $116 million for the first time since 2006. It compared with a net loss of $197 million in the year-ago quarter. Operating profit, excluding taxes, interest and pension-related costs, more than tripled to $477 million from $143 million a year earlier. The higher profit was attributable to higher sales and better pricing and mix.
Chrysler anticipates to earn between $200 million and $500 million in 2011, which would help the company hold an IPO later this year or early next year. It also expects to save $100 million in the second half of 2011 due to its debt refinancing and incur charges of about $500 million associated with paying off the loans early.
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