Auto Industry

Daimler to suspend Pacifica plant

Windsor factory to be shut for 2 weeks

By GREG KEENAN
From Friday's Globe and Mail

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The Windsor, Ont., assembly plant turning out the vehicle carrying DaimlerChrysler AG's hopes for a revival in the North American market will be shut for two weeks later this month because of slack demand.

The auto maker will shut its Windsor Assembly Plant, which makes the Pacifica crossover utility vehicle -- and another key product, the company's minivans -- during the last week of October and the first week of November amid slow demand for both the minivans and the Pacifica, which has been on the market less than six months.

The closing is the latest blow to DaimlerChrysler, which is engaged in a brutal pricing and incentive war in the North American market, but was hoping to use leading-edge new vehicles such as the Pacifica to leap ahead of its competitors and reduce profit-sapping incentives.

In fact, DaimlerChrysler Corp. president Dieter Zetsche called the North American market a "jungle" earlier this week.

"It's a bit scary when your main plant goes down for two weeks," said Ken Lewenza, president of local 444 of the Canadian Auto Workers union, which represents workers at the plant.

"I thought the Pacifica was going to be a huge hit."

About 6,000 DaimlerChrysler Canada Inc. employees will be affected.

It's strange, Mr. Lewenza said, to go from a situation where workers were putting in overtime on Saturdays and Sundays a few weeks ago to make up for production lost during the blackout, to the point where the plant will be shut down for two weeks.

DaimlerChrysler Canada spokeswoman Kerrey Kerr said the auto maker doesn't reveal production plans for more than one week ahead.

"It's pretty bad," said Ron Tadross, who follows the industry for Banc of America Securities Inc. in New York. "It probably says a lot about Pacifica. They probably need to put more money on Pacifica."

The Pacifica, which is made only in Windsor, is the first vehicle coming from a new product offensive on which the Chrysler group is pinning hopes for a market share recovery in North America. It arrived on dealers' lots earlier this year and was followed soon after by the Crossfire sports coupe. A new version of the auto maker's Durango sport utility vehicle will be out next month.

Mr. Zetsche said those three vehicles will be followed by another nine new cars and trucks next year and a total of 25 during the next three years.

The Pacifica was burdened, however, by a messy launch. The auto maker started out manufacturing just the high-priced versions -- $35,000 (U.S.) in the United States and more than $40,000 (Canadian) in Canada -- and shocked buyers.

"They have not earned the right to charge that much for a vehicle," one industry analyst said yesterday of Chrysler. "The thing is overpriced for what you're getting."

Chrysler now is offering a $2,000 (U.S.) rebate on the Pacifica in the U.S. market, where the base-priced model at $29,525 is more available.

Chrysler's minivans once set the standard for the industry as well and generated enough sales to keep the Windsor factory and another one in St. Louis humming. The Windsor factory operates on three shifts and Saturday overtime was a regular feature for more than a decade.

Minivan sales fell 9 per cent in the first nine months of the year in the U.S. market. They dropped to 296,232 from 324,140.

But inventories on the minivans and the Pacifica have not reached dangerous levels, while supplies of Town & Country and Caravan minivans sat at 49 days and 54 days respectively. A 60 days' supply is considered healthy.


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