Michigan, USA – Chaldean businesses will soon feel another round of pinches as Michigan continues its economic free fall. Chrysler LLC, whose owner has been in talks to sell the automaker to General Motors Corp., said Friday it will cut 25 percent of its salaried work force starting next month and warned that it will make more restructuring announcements soon.
Chrysler, which has about 18,500 white-collar workers, said Friday it also will cut a quarter of its contract employees — those who work for other companies under contract with the automaker. About 5,000 people are likely to lose their jobs, although the company would not say how many contract workers it has.
“This will impact many Chaldean families,” says Joey Markos, owner of a dry cleaner with standing accounts for many Chrysler professionals. “Many Michigan small businesses will feel the loss. For every professional job that is lost, three times the impact is felt on small business. I lose the revenue. I can’t spend, expand, or hire anyone. I have to layoff two great workers; single mothers who have been with me for over five years.”
CEO Robert Nardelli said the moves are being made as the company "works to find new ways to operate." Vice Chairman and President Tom LaSorda said Friday that sales projections for the rest of this year and in 2009 aren't looking good, and he indicated that more factory closures could be coming.
Chrysler's sales are down 25 percent through the first nine months of the year, the worst decline of any major automaker. "We have to align our (factory) capacity with what's going on at retail," LaSorda said in an interview with Detroit radio station WWJ-AM. "And that's the tough decisions that we make. And of course, there's probably going to be more if it stays at this level."
Markos blames the anti-business environment in Michigan. “Higher taxes, government fees and regulations, and political leadership in this state have buried us in Michigan.” Markos adds that so many of his Chaldean business friends have opened businesses in other states. “Wireless phone services in Texas, a hotel in Kentucky, and my brother is opening a dry cleaner in Las Vegas. Anything to get out of Michigan,” he says.
Michigan's economy has been in a one state recession for the last 6 years. The unemployment rate is 7.6% far above the national average of 4.9%. Michigan home foreclosures are the highest in the nation at over 18,415. Michigan is one of only two states in the country to actually decrease its population in the latest census report. The Mackinac Center for Public Policy reports that Michigan's annual average rate of growth for the past four years is only 0.1%.
On Thursday, Chrysler announced it will cut 1,825 jobs by eliminating one shift at a Toledo, Ohio, Jeep plant and accelerating the closure of its sport utility vehicle factory in Newark, Del., because of the slowing global economy and a shift toward smaller vehicles.
The cuts are so dramatic that they likely spell the end for Chrysler as in independent company and could indicate it is preparing itself for sale, said Aaron Bragman, an auto analyst with the consulting company IHS Global Insight.
Markos says, “Unlike the government, Chrysler is going to have to control its spending and expenses. That is why Michigan economy sucks. Michigan politicians don’t know how to stop spending and the people keep voting in big spenders. This has to stop. It is sad that Chrysler has to lay-off so many people, but it has to in order to survive.”
Markos is dead-on. In a memo to employees, Nardelli urged them to work hard to control expenses and said the company will have to move faster than it has in the past to restructure.
"We recognize that in order to strengthen our competitive capability, and reduce the time and cost to achieve our objectives, we cannot operate as we have in the past," he wrote. "In the near future, we will be making organizational announcements as a result of restructuring actions reflecting the need to find new ways to operate."
“Too bad our governor didn’t have the courage to send a memo to government employees to stop spending. If she did, it may have prevented so much of the mess Michigan is in,” adds Markos after learning about Nardelli’s memo.