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Automakers to Slow Down Plants

In another sign of a sluggish U.S. economy and slumping sales at General Motors Corp. and Ford Motor Co., the automakers said Wednesday they plan to slow down their plants the last three months of 2004 and make about 165,000 fewer cars and trucks than a year earlier. The announcements may be bad news for auto suppliers and their workers, particularly for big companies such as Delphi Corp., Visteon Corp. and Collins & Aikman.

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From The Milwaukee Journal Sentinel

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DETROIT — In another sign of a sluggish U.S. economy and slumping sales at General Motors Corp. and Ford Motor Co., the automakers said Wednesday they plan to slow down their plants the last three months of 2004 and make about 165,000 fewer cars and trucks than a year earlier.

The announcements may be bad news for auto suppliers and their workers, particularly for big companies such as Delphi Corp., Visteon Corp. and Collins & Aikman.

Ford will build fewer vehicles in the fourth quarter than it has in any year since the recession year of 1991, auto analysts estimate. For GM it will be the fewest vehicles built in a fourth quarter since 2001, the quarter after Sept. 11.

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The production cuts, a surprise for Ford but less so with GM, will chop into plant-floor workers’ hours and pay while also likely hurting the firms’ fourth-quarter earnings.

For suppliers, the cuts by their automaker customers mean they will build fewer parts and likely make less money.

“I don’t think production cuts are ever good news for automakers or suppliers,” said Catherine Madden, auto-production analyst at Global Insight, an economic-research firm. “No supplier I’ve talked to was prepared for how much Ford would cut for the rest of the year. They were prepared for GM to cut some, but even they cut a little more than expected.”

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GM is cutting its fourth-quarter production about 7 percent, or about 95,000 vehicles. Unlike Ford, which is mostly cutting trucks, GM is heavily trimming car production. It expects to build 66,000 fewer cars and 29,000 fewer trucks than a year ago.

Ford is cutting production nearly 8 percent, or about 70,000 vehicles. It expects to build 60,000 fewer trucks and 10,000 fewer cars in the fourth quarter, for a total build of 830,000 vehicles.

Auto-parts manufacturers in the Milwaukee, Wis., area that are most vulnerable to production cutbacks at General Motors are the Oak Creek factory of Delphi, a former unit of GM, and Strattec Security Corp. of Glendale. GM is Strattec’s largest customer. A call to Strattec wasn’t returned.

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Wisconsin suppliers vulnerable to Ford production cutbacks include Tower Automotive’s Milwaukee factory and J.L. French Automotive Castings of Sheboygan. Ford is French’s largest customer.

At Tower, cutbacks at Ford could hit home because the plant makes frames for Ford Motor’s Ranger trucks — and sales of Rangers fell 47 percent in August and are off 25 percent so far this year, Ford said Wednesday. A call to Tower wasn’t returned.

The number of workers on layoff at Tower’s Milwaukee, Wis., plant has surged by about 80 people in the last two weeks, according to the weekly manpower report from Smith Steel Workers Local 19806. About 213 members of the steelworkers union are laid off, compared with 459 who are working. The number of steelworkers laid off is at its highest point since May.

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The suppliers least likely to be affected by production cutbacks at Ford and GM are Johnson Controls of Glendale, Wis., and Modine Manufacturing Co. of Racine, Wis. Though GM, Ford and DaimlerChrysler are its largest customers, Johnson Controls said, nearly half its sales from those companies come from outside the United States.

At Modine, spokeswoman Lori Stafford said about 35 percent of the manufacturer’s sales come from the auto business. But that is primarily from vehicles produced by Chrysler and BMW.

A squeeze between slower-than-expected sales and a glut of unsold cars and trucks is forcing the production cuts on GM and Ford. The Chrysler Group doesn’t disclose its production plans.

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“We are doing this to production just to be cautious. The economy is definitely in a soft patch, and clearly it’s fallen off the growth pace of last year or even early this year,” said George Pipas, Ford sales analysis manager. “We are certainly more cautious about the economy than we were three months ago. What we need to see is a resumption of job growth.”

Ford is already on pace to build fewer vehicles in the current quarter than it ever has for a July-through-September period.

“No matter how Ford spins it, this is not good news. The entire industry was surprised by it,” Madden said.

Ford said it doesn’t know whether it will end up idling plants for a few weeks to trim production but will definitely avoid running truck and SUV plants on overtime as it did last year.

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The decline in light-truck sales reported by GM was apparent in production figures released Wednesday by GM for its factory in Janesville, Wis., which employs 3,900 people.

Through August, the GM plant had produced 147,000 SUVs, 25,000 fewer than the same period in 2003, GM said Wednesday.

Copyright 2004 The Milwaukee Journal Sentinel. All Rights Reserved.

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