Strattec Security Corp. lost revenue because of a temporary shutdown at Fiat Chrysler Automobiles’ Sterling Heights, Mich. plant, but the Milwaukee-based company doesn’t anticipate any long-term impact from FCA’s decision to lay off 1,300 workers from the plant.
The Milwaukee-based automotive lock and key maker lost $3 million in revenue during the third quarter because of temporary shutdowns at Sterling Heights and Toluca, Mexico, according to slides from a company presentation at the Sidoti & Company Spring Emerging Growth Conference on March 31.
The lost revenue would have accounted for roughly 11 percent of Strattec’s revenue from Fiat Chrysler for the third quarter in 2015. Still, the company said it expected to have revenue of $95 million from all sources for the quarter, an increase of almost 7 percent from 2015.
Strattec chief executive officer Frank Krejci said FCA is shifting its focus to more profitable jeeps and SUVs. He said he doesn’t anticipate the lay offs will impact the company’s overall volumes with Chrysler, provided Chrysler is able to make gains in the more profitable areas. About 28 percent of Strattec’s sales are to Fiat Chrysler, the most of any original equipment manufacturer. General Motors is second at 26 percent.
“I don’t expect a significant impact on us,” he said, adding that if there were, it would likely be at the Strattec’s Mexico operations, not the Milwaukee area.
According to a Reuters report, workers at the Sterling Heights plant in suburban Detroit will return to work this coming Monday after a 10-week shutdown called to match consumer demand with production, the company said. The plant makes the Chrysler 200 sedan. U.S. sales of the Chrysler 200 were down 63 percent in the first three months of this year from a year earlier, as FCA has de-emphasized sales of the model which had been often sold to rental agencies.
The company did not say how long it would continue to make the Chrysler 200. In January, Fiat Chrysler Automobiles chief executive Sergio Marchionne said the company would cease making the midsize sedan as well as the compact Dodge Dart, unless a partner could be found to keep the production going.
United Auto Workers Vice President Norwood Jewell said in a statement that the move was not unexpected, and expressed optimism that FCA will find jobs for the workers by making more trucks and SUVs.
“FCA is not the only company experiencing a slow market for small cars,” Jewell said. “On a bright note, there is a strong demand for larger-sized vehicles. The company has been planning to increase its capacity to build more trucks and SUVs. I believe that in the long term this move will be a positive one for our members and the company.”
It is one of the largest layoffs at a U.S. auto plant since the 2008-09 recession, and there is widespread speculation that it will not be the end of production changes among U.S. automakers trying to adjust to consumer tastes that continue to shift from cars such as sedans and hatchbacks to SUVs and pickup trucks.
Automakers set a record for U.S. sales in 2015, driven by increases in sales of light trucks. Sales of passenger cars were actually down. The trend has continued on both fronts this year.
Todd Zakreski, president of Waukesha-based Husco Automotive, said in an email that Fiat Chrysler’s decision to layoff Sterling Heights workers would not have an impact on his company. He said most of the products Husco sells to FCA are used in vehicles with HEMI or Pentastar engines. These include Ram Truck, Dodge Charger and Challenger, Jeep, and Pacifica mini-van.
“These vehciles in general are still exhibiting decent demand unlike the Chrysler 200,” he said.
Zakreski noted the trend in the North American auto market has been a mixed bag with some vehicle platforms doing well and others softening.
“We are seeing some slower growth points for overall current production requirements,” Zakresi wrote. “That said, it’s not exhibited a level of harshness that would drive any changes from our 2016 expansion plans. We are on track for expanding our technical talent pool and filling our 2016 planned new positions.”
He added that it is important for anyone in the auto market to keep a close eye on key market metrics.
“The demand for vehicles overall in North America has been strong for quite some time,” he said. “And it is for sure a cyclical industry.”
