In a shift in strategy that is expected to eliminate an estimated 800 jobs locally, DaimlerChrysler AG yesterday announced that it is retiring the Toledo-built Jeep that helped give rise to the sport-utility vehicle craze.
Production of the Jeep Cherokee, which debuted in 1983 and is claimed to be the first compact SUV, will stop in late June with the end of the 2001 model year. Industry analysts say the move isn't surprising and was prompted by sagging sales and fears that the vehicle would hurt sales of the Toledo-built Jeep Liberty, which will debut next week at the North American International Auto Show in Detroit.
“It is a major disappointment to us,” said plant union leader Bruce Baumhower. “We've built the car for 17 years and are very proud of it.”
Plant union leader Bruce Baumhower, with Mayor Carty Finkbeiner looking on, said at a news conference that early retirement incentives might be offered to some older workers.
He added, however, that union representatives are pleased with a second announcement that the company has modified its new assembly plant here to make it easier to add vehicle models. If a new vehicle is added, the move could help replace jobs that will be lost when the more mechanized Jeep Liberty plant goes into full production this spring, said Mr. Baumhower, president of United Auto Workers Local 12.
Company officials in Auburn Hills, Mich., said they spent $35 million on expansion of a building and adding equipment so that the plant will have the capacity to “build two separate products as well as prototypes of a third.” The expenditure is part of a $1.2 billion investment in Jeep assembly operations in Toledo by DaimlerChrysler.
The company, which in Toledo makes nearly all the Jeep Cherokees and Wranglers sold worldwide and soon will be producing saleable models of the Liberty, won't identify any vehicles it is considering for the new plant or say whether the second vehicle might be the Wrangler.
The Wrangler is built at the firm's Stickney Avenue factory and at the 90-year-old Jeep Parkway factory, where the Cherokee has been produced. Union leaders previously expressed fears that that plant might not be viable with only the lower-profit Wrangler if Cherokee production were halted.
Company spokesman Trevor Hale said the carmaker has no plans to close the Jeep Parkway plant. Mayor Finkbeiner said that he received assurances in recent days from a company executive that the plant - the nation's oldest car assembly factory - will stay open at least through 2001.
That same official told Mr. Finkbeiner that the company will keep its promise to employ 4,900 employees in Toledo assembly operations. There are about 5,000 hourly and salaried workers now.
But employment figures provided to the UAW raise questions about whether the company will keep that commitment, which was made in 1997 in exchange for $280 million in taxpayer incentives granted to the new plant.
About 800 workers will be lost with the company's decision to retire the Jeep Cherokee, Mr. Baumhower said.
Plant officials have indicated that the new factory next to the one on Stickney Avenue will employ about 2,050 to make the Liberty, he said. Other workers, including salaried employees and those assigned to the Wrangler line, would bring total Toledo Jeep employment to about 3,900, according to figures provided to the union leader.
That doesn't include 200 mostly temporary quality control workers who would help with the startup of the Liberty or 700 other employees on disability leave.
Mr. Hale said he had no information about that. “We will finalize our employment when we complete the transition to the new plant. It's too early to tell now.”
It hasn't been determined how layoffs will be accomplished, although the company might offer early retirement incentives to older workers, Mr. Baumhower said. Some cuts will involve temporary workers, he added.
Still, the end of the Cherokee contributes to job security fears at the plant, where workers have been laid off 11 weeks since summer, including normal summer and Christmas shutdowns.
The company expects the announcement to prompt many workers who had planned to stay at the old Jeep Parkway plant to move to the new factory, the firm's spokesman said.
“Part of the reason we made the decision Wednesday was so that the Cherokee work force can bid on new jobs at the plant,” Mr. Hale explained. “It will allow for a smoother launch because lots of our senior people who might have continued with the Cherokee will now come over to the Liberty.”
That came as a surprise to Joe Depowski, UAW chairman at the factory, who said the work force for the new plant has been selected.
The company's planning for the Jeep Cherokee has changed several times over the past year.
It was originally slated for retirement in November, 2000, and be replaced by the then-unnamed Liberty. But continued strong sales in 1999 and early 2000 prompted the company to extend Cherokee's life indefinitely, and it said the Liberty would be an added Jeep model. Sales for the 18-year-old, mid-priced Cherokee slipped badly in recent months, however, amid an overall slowdown in the automotive industry and a glut of SUVs.
The company sold 141,457 Cherokees nationwide last year, down 14 percent from record 1999 sales.
“The cutoff came a little sooner than I expected, but it isn't surprising,” said David Healy, an analyst with Burnham Securities in New York.
“The outlook for lower sales this year plus a lot of new competition prompted the decision to finally wind it down.”
“This is a smart move,” said Rod Lache, an analyst with Deutsche Banc Alex. Brown in New York. “The new Liberty would've ended up cannibalizing the Cherokee to some extent.”
Still, the decision signals the end of an era, some analysts said.
“It will be one of those cars that people will restore them and keep them around for years - it's a classic,” said Jim Gillette, an analyst at IRN, Inc., an industry research group in Grand Rapids, Mich. “The Jeep tradition - it's got a place in American culture in American history.”
The former Chrysler Corp. inherited the vehicle in 1987 with its purchase of the Toledo-based Jeep Corp. from American Motors Corp.
“The Jeep Cherokee has had one of the longest and most successful rides in the history of the automotive industry,” Tom Sidlik, general manager in the carmaker's Jeep operations, said in a written statement. “Jeep invented the compact SUV segment 18 years ago, and with the launch of the all-new Jeep Liberty, we will further enhance and broaden the overall Jeep brand.”
Bloomberg News Service contributed to this story.