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Belvidere on edge as chip shortage highlights vulnerable plant communities


Belvidere, Ill. — The COVID-19 pandemic and an unprecedented global semiconductor shortage are wreaking havoc on the auto industry, idling plants, laying off thousands of workers and fueling uncertainty. Nowhere is that more evident than at the Jeep Cherokee plant here.

The predicament of Stellantis NV's Belvidere Assembly Plant is unique at the moment — hit by chips, sinking demand for its SUV in an SUV-crazy market, no new product commitments and now seeing its second shift cut. The decision to lay off indefinitely 1,641 people by July 26 seeks to balance production and demand, the automaker says.

But it also is an early indication of long-lasting implications of the pandemic-induced supply constraints that have exacerbated Belvidere's situation. They've also highlighted vulnerable plants whose products aren’t the high-margin, high-demand priorities fattening bottom lines.

Because of the shortage of microchips used in consumer electronics — including vehicles’ automated driving functions, infotainment, heated seats and more — General Motors Co.’s Fairfax Assembly Plant in Kansas City will be down for 21 consecutive weeks at the least. Ford Motor Co.'s Louisville Assembly has idled for more than nine weeks so far. A couple plants in Ontario have had significant downtime, too.

Belvidere next week will be down for its 12th week this year because of the chips shortage as Stellantis makes production of higher-margin SUVs and trucks top priority. The Illinois plant lost almost 112,000 vehicles, more than any other major automaker plant by several thousand, AutoForecast Solutions LLC estimates.

"The chip shortage is complicating the situation that already existed with the sliding demand for the Cherokee," said Sam Fiorani, vice president of global forecasting for AutoForecast Solutions LLC. "Extreme competition in mid-sized crossovers and an aging product are combining to reduce the demand for the Cherokee itself. That's compounded by a lack of chips.

"If you’re Stellantis, you’re going to prioritize Ram pickups and Grand Cherokees over the Cherokee."

Because of that, autoworkers and community members in north central Illinois feel they sit between two futures. To the plant's south is Normal, Illinois, where electric-vehicle startup Rivian Automotive Inc. is prepping a closed Mitsubishi Motors Corp. plant to make vehicles of the future this summer. To its north is Janesville, Wisconsin, where General Motors Co. made SUVs until 2009.

“There are some people from Janesville who work here now,” said George Hughes, 46, of Loves Park, a worker in quality at Stellantis NV's Belvidere Assembly Plant that loses its second shift next month. “We don’t know if we’re going to end up the same way. It’d be helpful if the company communicated more with us.”

The weeks without production put communities like Belvidere on edge.

“People a lot smarter than me tell me it’s nothing to worry about, but I do,” Boone County chairman Karl Johnson said. “It took a long time for Janesville to recover. I think about what it would mean if that were to happen here.”

With the plant down because of the chip shortage, the region is seeing a glimpse now. For DiCello’s Pizza down the road, that means a 35% to 40% drop in business — the worst it’s seen since opening 15 years ago.

"We could deliver $3,000 a week to the plant," co-owner Michelle Morabito said. "All of that is gone. And it's not just Chrysler. It's all of the other companies, the suppliers, too."

'Barely getting by'

Belvidere is 75 miles west of downtown Chicago, enough to be a Republican stronghold. Surrounded by farmland, the county seat has the state’s most popular county fair with attendance almost five times the city’s population of more than 25,000. It has proud residents and a lively downtown with Victorian Era architecture and several Mexican restaurants. Frank Lloyd Wright designed a chapel in a local cemetery.

Its industrial roots date to the mid- to late-1800s. It was home to the now-defunct National Sewing Machine Co. The Green Giant Co. plant is now owned by General Mills Inc. Dean Foods Co. also has an ice-cream plant here. Goods-producing industries like manufacturing, construction and agriculture represented 52% of Boone County's economy in 2019, according to the Federal Reserve Bank of St. Louis, making it a bellwether for recessions.

Chrysler Corp. wheeled to town in 1964, becoming the city and county’s largest employer. Stellantis currently employs 3,580 people mostly from northern Illinois and southern Wisconsin. Suppliers like Android Industries LLC, Magna International Inc. and Yanfeng Automotive Interior Systems Co. Ltd. employ hundreds more.

United Auto Workers Local 1268 President Kevin Logan said another 800 workers plus janitorial members could be affected by the shift cut at the assembly plant. They don't have transfer rights in their contracts.

"Just had a baby, bought a house, all that stuff, barely getting by," said Kevin Pelley of Rockford, who works in production at Oakley Industries Inc.’s sub-assembly plant in town, in a Facebook message.

The news coming days after Mayor Clinton Morris took office was a bristling way to begin his term as Belvidere’s first registered independent mayor.

“We will get through this supplier situation, and the plant will be operating hopefully with two shifts again,” Morris said. “They’ve invested a lot of money here. The plant pulls from the whole region, and there are plenty of hardworking people here.”

Belvidere last year claimed third for manufacturing quality in J.D. Power’s Initial Quality Study of 75 plants in the Americas.

It's also persisted through trying times. Downtime during the Great Recession remains in the community's collective memory. In the past decade, Belvidere produced Jeep Compass and Patriot crossovers and Dodge Dart sedans before the Cherokee began production in 2017.

"It's not the first time the plant has been down to one shift," said Tom Klahn, 29, of Loves Park, who works in management at the plant. "We've been here before."

'Paranoia'

Other plants operated by Detroit's automakers, however, haven't yet seen a shift cut. GM's Fairfax could run at 35% capacity this year and since 2017 has operated at 45%, according to forecaster LMC Automotive. A healthy capacity utilization is around 70% or higher, said Katelyn Drake, senior analyst of Americas light vehicle production forecasting at LMC. Without replacements for the Chevrolet Malibu sedan and Cadillac XT4 crossover, LMC predicts Fairfax will be without production in 2026 subject to UAW negotiations.

“The downtime being experienced at Fairfax Assembly and other locations due to the semiconductor shortage should not be taken as a reflection of our confidence in those respective workforces and their ability to build great products,” GM spokesman Dan Flores said in a statement.

LMC projects Ford's capacity use in Louisville will drop to above 50% from 75% in 2019. But the forecaster expects Lincoln Corsair and Ford Escape crossovers to continue there.

"They just went through the pandemic," said Todd Dunn, president of UAW Local 862, of his members. "Some are worried. Some live at home still. Some are OK. Some are excited. Some are mad. It's just a blend."

There are no ongoing discussions about cutting shifts at Louisville or other Ford plants in North America, spokeswoman Kelli Felker said.

In determining lines to idle, "we look at a number of factors, including overall consumer demand by nameplate, contribution margin, the individual vehicle's contribution to our fuel economy commitments and our ability to make up for the short-term production loss later this year," Felker said in a statement.

Stellantis' Windsor minivan plant and Ford's Oakville SUV complex in Ontario also have idled this year. But negotiations with Canadian autoworkers union Unifor last year secured a combined more than $2.6 billion investment to build EVs.

Belvidere, so far, is not so lucky. The plant was running at 90% capacity in 2018, according to LMC. It dropped to 70% in 2019 when the company cut the third shift. LMC projects Belvidere will produce below 40% of its capacity this year, below the industry standard to ensure profitability.

Cutting the second shift hits Coach’s Corner Bar & Grill in downtown Belvidere, where workers could stop before or after their shift for a bite or drinks. It's slashed its made-from-scratch menu and tailored days to offerings like Wing Wednesday, Fish Fry Friday and Sunday Funday Scraps for what’s left over.

“It’s a daily fight to pay the bills,” said Darrell Reidinger, managing partner. Business dropped 10% with the assembly plant closed, though on Wednesdays and Thirsty Thursdays that number is as high as 30%.

“If this extends into September, it will cripple us and the whole Belvidere business community. When things of this nature happen at Chrysler here, people become more frugal with their money. It creates a certain amount of paranoia. Hospitality is the first thing to go. This has been the toughest year of my entire career, and I’ve had 18 restaurants before under my belt.”

Before the pandemic, Belvidere had downtime for a week here or there to align production with demand. Sales fell 10% in 2020’s coronavirus-struck year, the largest decrease of the company’s U.S.-assembled vehicles.

“It’s the age, and there are many newer options in the market,” AutoForecast Solutions' Fiorani said of the Cherokee that was last redesigned in 2014. Belvidere “needs a new model.”

Stellantis will share its long-term strategy later this year. AutoForecast Solutions and LMC predict it will redesign the Cherokee for Belvidere with electrified options, but not until around 2023 or 2024.

“There is a market there for Jeep to fill," Drakes said, "and the Jeep brand carries a lot of weight."

Then-Fiat Chrysler Automobiles NV squashed rumors during 2019 labor talks that Belvidere was at risk months after the automaker broke ground for a new $1.6 billion assembly plant in Detroit. The 2019 contract included a $55 million investment for Belvidere. The next contract negotiations are in 2023.

“We have nothing to announce related to the future of the Belvidere plant,” Stellantis spokeswoman Jodi Tinson said in an email.

Staying competitive

Without new product, several workers expressed their anxiety to The Detroit News on the condition of anonymity for fear of repercussions at work.

"The UAW has initiated discussions with the company on potential job opportunities for our laid-off members," UAW Vice President Cindy Estrada said in a statement. "Also, we continue to make inquiries about potential allocation of future product for the Belvidere facility."

Martha Melara of Rochelle, Illinois, has been a line worker at the plant for nine years. She missed the seniority requirement to keep her job.

Stellantis isn't offering buyouts. It'll seek to place those who wish in available positions in other labor markets, but the workers won’t know if that’s an option until after their final day. Days following the job cut announcement, the automaker was promoting temporary positions available in Metro Detroit on social media. Workers said that felt like a slap in the face.

For employees like Melara, transferring isn’t feasible. She has a daughter, and her father, who has mobility challenges because of nerve damage in his legs and hands, is in town.

She's been seeking new job opportunities and a larger apartment so her dad can move in with her, but many in the region know the Stellantis layoffs are happening in July, making progress difficult.

"It’s disappointing," Melara said. "Just trying to make the decision as far as taking a new job, it's a pretty steep pay cut. That's troubling, but you have to start somewhere."

The community is readying itself to compete for Stellantis' next product, said Pamela Lopez-Fettes, executive director of the nonprofit Growth Dimensions, which is focused on economic development in Boone County.

“Typically, every five years there’s a change in their products and strategies,” Lopez-Fettes said. “We were surprised it was such a significant number that would be affected.”

Growth Dimensions and the state of Illinois have had conversations with Stellantis since January. Work is underway to expand EV charging infrastructure in the region. A new auto innovation network of suppliers to retailers seeks to find solutions on current problems and future needs. State and local funds are supporting a $6 million project to widen the road near the plant.

“If they choose us for their next product, I am confident we can meet their needs and exceed their expectations,” Lopez-Fettes said.

Rock Valley College — a community college based in Rockford, Illinois — also is opening an advanced technology center this fall in Belvidere. Taking over a shuttered department store, the 77,000-square-foot facility will combine under one roof credit and non-credit programs in computer numerical control machining, mechatronics, industrial maintenance, welding and trucking. It expects to launch an automotive program the year following. Discussions with Stellantis and other employers helped in the facility's development to benefit incoming workers and existing talent, said Chris Lewis, the college’s vice president of workforce development.

But some autoworkers fear what's to come. Hughes, the 11-year autoworker in quality at Belvidere, made the cut. The Detroit native, however, wonders if he should look into Colorado or Texas where he hears companies are doing hiring.

"It makes me nervous," Hughes said of the situation in Belvidere. "We don't know what to expect."

bnoble@detroitnews.com

Twitter: @BreanaCNoble

Staff Writers Jordyn Grzelewski and Kalea Hall contributed.