Detroit to serve as a cheap labor platform

Behind Fiat Chrysler’s $4.5 billion investment in the Motor City

By Kevin Reed
20 August 2019

With contracts with the Detroit automakers set to expire in less than a month, Fiat Chrysler Automobiles (FCA), the United Auto Workers (UAW) and the corporate news media have gone into high gear to promote the progress made on the construction of “the first new auto assembly plant” in the heart of Detroit in three decades.

On August 13, the Detroit Free Press, Detroit News, Automotive News and local TV stations were on hand to hail a milestone in the construction project, the vertical placement of the first iron column in the new $1.6 billion FCA assembly facility on the former grounds of the Mack Avenue Engine Complex.

According to the company, the new assembly plant—projected to be completed by the end of 2020—will build the next-generation Jeep Grand Cherokee, a new three-row, full-size Jeep SUV, and plug-in hybrid electric SUVs. The new Mack Avenue facility—along with an additional $900 million to retool and modernize the existing Jefferson North Assembly Plant—is part of a $4.5 billion investment plan to expand production capacity and develop electric vehicles in the city.

Construction equipment on the grounds of the new FCA Mack Avenue Assembly Plant in Detroit

An important feature of the media coverage of the construction are claims by FCA—with the backing of the UAW and Detroit Democratic Mayor Mike Duggan—that city residents will be hired to fill the new jobs in the two facilities. According to FCA’s original announcement on February 26, there will be “3,850 new jobs to support production” at the new Mack Avenue plant and another “1,100 new jobs at Jefferson North.”

The company has also said it will relocate the Mack I engine facility to the Dundee Engine Plant, retool the Warren Truck assembly plant and make additional improvements at Warren Stamping and Sterling Stamping to bring the total investment to $4.5 billion and bring 6,500 new jobs to the Detroit Metro area.

Aside from the fact that given the current economic volatility these plans are not guaranteed to materialize, what none of the corporate media representatives, UAW officials or spokesman for FCA are discussing is that the changes in Detroit are part of a strategic “realignment” of the auto company’s US manufacturing operations. Driven by changes in the global auto market, FCA’s plans are predicated, above all, upon the further assault on the jobs, working conditions, wages and benefits of autoworkers needed to maintain levels of corporate profitability demanded by Wall Street.

An indication of the attacks facing autoworkers is revealed by FCA’s recent layoffs of 1,370 workers at the Belvidere, Illinois plant and the approaching layoffs of another 1,500 workers at its Windsor, Ontario assembly plant, as the company shifts resources toward its most profitable SUVs. It is estimated that FCA earns an average of $15,000 profit on each SUV.

Among the most pressing objectives of FCA and the UAW in the current contract negotiations is to beat back the struggle of autoworkers to reverse decades of concessions. Under conditions where the companies have made record profits—due to the vast reduction in labor costs engineered by the Obama administration and the UAW following the auto bankruptcies of 2009—the contract talks are being used to impose even more concessions, especially an increase in the number of low-paying temporary part time (TPT), contingent workers and third-party contract employees.

Central to this strategy is the campaign by FCA, the UAW and local Democrats to exploit the devastation in the city—the product of decades of deindustrialization—to provide a source of cheap labor. Their intent is to make Detroit and other former centers of auto production in the US into a flexible and cheap labor platform so US automakers can compete with their rivals in Europe and Asia in the rapidly changing international automotive market.

In a deal with Michigan Democratic Governor Gretchen Whitmer, Mayor Duggan and the City Council—which handed more than $400 million in public property and tax incentives over to the auto corporation—FCA has agreed to a vaguely defined series of “community benefits.” One of these is that FCA will interview and hire Detroit residents first for any available jobs in the new facilities.

Over the past month, the city administration hosted a series of job fairs and “readiness” events as part of its “Detroit At Work” program. At the last readiness function on August 6, Mayor Duggan spoke before a group of applicants and said, “My intention is at the end of August to hand FCA 10,000 qualified Detroiters’ names, because our agreement is they have to interview every Detroit candidate before they interview anybody from the suburbs.” He then explained that the Detroiters would be eligible for the positions after “some of the 5,000 jobs” are taken “by UAW folks coming from another place.”

The changes FCA is making in Detroit are part of a five-year strategic plan that was unveiled in June 2018 by then-CEO Sergio Marchionne a month before his death. Speaking from Italy via video conference to investors and the business press, Marchionne said the future of FCA would include a significant expansion of the Jeep SUV and Dodge Ram truck sales internationally, along with the development of electrification, connectivity and autonomy in their auto lines.

Marchionne said FCA’s strategy involved doubling the worldwide sales of the Jeep SUV to 3.3 million vehicles—approximately one-half of the global SUV market—by 2022. This would include the introduction of four new fully electric Jeep models to be sold primarily in Europe. Meanwhile, the plan for Dodge Ram pickups was to increase sales by 30 percent by 2022 to make FCA the number two brand in North America.

FCA is in a life and death battle for market share and profitability against its rivals within the US, Europe and Asia. Despite the fact that the company paid off its debt obligations in January 2018 and had earnings of 13 percent ($2.27 billion) by the end of last year—largely due to a series of plant shutdowns and the low-wage opportunities negotiated by successive UAW contracts—Wall Street has battered the company’s stock ever since. From nearly $25 per share in January 2018, FCA stock has steadily declined over the past 20 months and currently stands at $12.49, exactly one-half of its peak.

With the company’s presence in the Chinese market and vehicle electrification far behind the competition, it is possible that the recently abandoned merger plans with Renault could be revisited. The proposed merger—which would have created the world’s third largest auto company, including FCA, Renault and Nissan—was dropped suddenly in June by the FCA board of directors, apparently due to concerns about the attitude of the French government, the biggest shareholder of Renault, with a fifteen percent stake.

However, according to a report in Automotive News, “The enduring question is whether the two automakers have better options than combining with each other. Returning to the table still looks like the least painful way forward.” With increasing indications of a global recession, it is clear that a further significant restructuring in the auto industry is on the agenda.

As explained by the World Socialist Web Site Autoworker Newsletter, autoworkers are on a collision course with the auto corporations. The battle for jobs and the restoration of concessions requires a fight against both the UAW and the companies on the basis of a new strategy: one that unifies workers across national boundaries in a common struggle against the global corporations, based on a socialist program to meet human needs, not private profit.

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