DaimlerChrysler Cancels Windsor Assembly Plant Proposition

CAW President Buzz Hargrove Outraged

It was only a little over a month ago that the enterprise minister of Ontario, Canada, Jim Flaherty, announced his confidence in the new DaimlerChrysler plant to be built in Windsor, just south of Detroit. Since then, the confidence level has dropped, drastically.

Late on Wednesday the Chrysler sector of DaimlerChrysler AG axed their plans to build a new $1.2 billion assembly plant in Canada. The cancellation could ultimately lead to issues between the automaker and the Canadian Auto Workers union (CAW).

Windsor is where DaimlerChrysler currently builds its Caravan and Town & Country minivans as well as the new Pacifica crossover SUV. The proposed plant initially was said to be for a new small-sized pickup based on the Dodge M80 concept vehicle, but the U.S. market that would purchase the majority of the facilitys production is currently in the dumps due to never having fully gained momentum after 9/11, and more recently the war in Iraq.

In their announcement this week the German-American company stated that, "A proposed new manufacturing facility, incorporating supplier initiatives for Windsor, Ontario, will not be built because of business viability issues."

Dieter Zetsche, Chrysler Chief Executive Director stated that the business environment had changed dramatically since the addition of the plant to Chryslers Canada-based production was held out as a possibility to the Canadian Auto Workers (CAW) in contract talks last fall.

Zetsche said, "The state of the automotive market has created a formidable hurdle, especially for a small, entry-level vehicle such as the one we were considering. Additionally, competitive pricing, ongoing incentives and increasing overcapacity in North America led us to conclude that this is not the time to add new capacity."

Plans to build the new plant were billed by Buzz Hargrove, CAW chief, as motivation for his unions willingness to compromise in labor talks that concluded last October with a new agreement.

"This is a huge blow. Were going in the wrong direction and were seeing plants close and production reduced. We thought this would help start to reverse a trend, and this is not going to happen," CAW president Buzz Hargrove stated to Reuters.

He continued, "Im just devastated. Im angry. Im frustrated. Its the last thing in the world I expected. Quite frankly I thought things were rolling along well on the project."

According to Hargrove the potential plant would have created up to 2,500 assembly line jobs and, while he didnt say it, no doubt a much needed boost to the CAW.

In response Zetsche stated, "I do understand the emotions and, of course, we knew there would be a big disappointment." Additionally he said, "At the same time, I have to make it very clear that during last fall, we did not give a promise that we would build that plant. What we said, and we said it clear and loud, was that we would try to do everything possible to make that a viable business case, but that we only could proceed if there would be an economic basis for that."

According to Reuters, in an effort to calm waters Zetsche added that "the door is clearly open to Canada and to Windsor" for further investment and reminded all involved about plans for DaimlerChrysler to spend $2.6 billion in Canada between 2002 and 2005.

While it looks like a black week on Canadas national calendar independent auto analyst Dennis DesRosiers doesnt necessarily agree.

"Its not devastating. Its negative that we lose upside potential, but we didnt have these jobs to begin with, so its not as if an existing worker is losing his job." He added, "It hurts in that we lose upside potential, not that were losing existing jobs."

But losing out on assembly plants in Canada is not unheard of. The country above the 49th parallel has lost many deals south of the border because of cheaper labor, lower-cost facilities, and incentives offered by state or federal governments; the Southern U.S. and Mexico being the most desirable plant locations.