TORONTO - A parts shortage resulting from Chrysler's restructuring under U.S. bankruptcy protection has forced the company's Canadian branch to shutter its assembly operations indefinitely, putting about 8,700 people out of work.
"Due to the restructuring announcement made yesterday by our parent company, Chrysler LLC, a number of suppliers have stopped shipment of parts to our manufacturing facilities," Chrysler Canada spokeswoman Mary Gauthier wrote in an email.
"This has halted operations in our Canadian assembly plants."
Chrysler LLC said Thursday it will shut down all of its U.S. plants for 30 to 60 days while it completes a technology-sharing alliance with Fiat -- a cornerstone of its restructuring plan.
And while Chrysler Canada is not involved in the bankruptcy filing, the parts shortage forced the closure of its plants as well.
Gauthier said Chrysler's two southern Ontario plants, in Windsor and Brampton, ceased production Friday and would remain closed "until further notice."
The news came as documents in Chrysler LLC's bankruptcy case revealed the automaker has plans to close five more of its U.S. plants permanently by the end of next year.
The company's first day in court revealed that the proceedings could be lengthier than planned, and raised questions about whether the restructuring could be completed and plants reopened in the 30 to 60-day timeline given by the company on Thursday.
Rick Laporte, president of Canadian Auto Workers Local 444 in Windsor, said Chrysler employees will receive about 65 per cent of their regular salary under supplementary unemployment benefits and employment insurance.
But he said he's more worried about workers at the parts plants that supply Chrysler, where workers are some of the "lowest paid on the totem pole" and don't qualify for unemployment benefits.
Parts suppliers agreed Friday that Chrysler's restructuring is good news for their industry in the long run, but layoffs, plant shutdowns and consolidation will be the norm until the industry stabilizes.
Rob Wildeboer, executive chairman of Canadian parts supplier Martinrea International Inc. (TSX:MRE), said his company will be forced to temporarily lay off workers while Chrysler ceases production. Chrysler is one of Martinrea's top four customers.
"Any time you have a shutdown, what it means is you have to adjust your plant capacity on a quick basis," Wildeboer said in an interview Friday.
"What's going to have to happen is that those plants that have significant Chrysler work will adjust the workforce for that timeframe."
Martinrea has 10 Canadian plants, all in southern Ontario, and employs 4,400 people worldwide.
It is one of many Canadian auto parts suppliers that will be affected by Chrysler's restructuring, including Magna International Inc. (TSX:MG.A) and Linamar Corp. (TSX:LNR).
Although Wildeboer would not say how many Martinrea employees will be affected by the Chrysler shutdown, he said the company will also adjust its workforce in response to General Motor's announcement that it will close 13 of its U.S. plants for nine weeks in the summer as part of its own restructuring process.
"I would imagine that the second quarter, which is the April to June timeframe, is a period of adjustment for a lot of suppliers, and we'll do that on a plant-by-plant basis, a region-by-region basis," he said.
On Friday, ratings agency DBRS placed Magna's rating under review with negative implications as a result of Chrysler's bankruptcy filing.
Bill Pochiluk, president of industry adviser AutomotiveCompass, said the unexpected shutdowns announced by both Chrysler and GM may result in the "dissolution of the supply chain."
"If we're talking about almost a universal shutdown of Chrysler for 30 to 60 days, that has enormous bad cash flow implications for suppliers, and we suspect that suppliers particularly dependent on Chrysler will have some trouble financing their operations in the near term and some will be inclined to basically call it a day," he said.
Wildeboer said consolidation among suppliers will be an inevitable outcome of Chrysler and GM's restructuring processes.
"This industry has been consolidating, is right now and will continue to consolidate as customers adjust to their volumes," he said.
The number of jobs lost at Chrysler and General Motors will pale in comparison to the fallout as the parts industry consolidates.
Gerry Fedchun, president of the Automotive Parts Manufacturers' Association, said it's impossible to guess how many jobs will be lost in the Canadian supplier industry, but it's widely estimated that every one job lost in an assembly plant leads to a total of seven jobs lost in the economy as a whole.
"It is this huge spider web," Fedchun said, adding that there's no doubt some Canadian auto parts companies will go out of business as Chrysler and GM restructure.
"There's just so little cash now in the system that some people are not going to make it," he said.
"I can't tell you which ones, I just know it has to happen because things are so bad."
Export Development Canada said last month it will provide $700 million in receivables guarantees to insure parts manufacturers against non-payment from troubled automakers.
But Fedchun said that won't be enough to help suppliers when the automakers simply aren't making cars, and called on the government to provide direct financial assistance to the industry.
The auto parts industry employs approximately 79,000 Canadians and is largely based in southern Ontario.
