Brent Snavely

Detroit Free Press

Fiat Chrysler Automobiles said today it will lay off about 1,300 workers at its Sterling Heights Assembly Plant as it cuts back on production of its poor-selling Chrysler 200 midsize sedan, amid growing U.S. demand for crossovers and SUVs.

The automaker told the UAW, its workers and the State of Michigan that it is eliminating a shift of workers at the plant starting July 5. Another 120 workers will be laid off at the nearby Sterling Stamping plant.

"While today's announcement of a shift reduction at Sterling Heights Assembly is unfortunate, it is not unexpected," UAW Vice President Norwood Jewell said in a statement. "FCA is not the only company experiencing a slow market for small cars."

The company said it will place the indefinitely laid-off workers in open positions as they become available at other plants.

Still, the layoffs are unusual for FCA and for the U.S. automotive industry, which is in the middle of five consecutive years of record sales. It is the first large-scale U.S. job cut by the automaker since it emerged from bankruptcy in 2009. FCA has added about 11,000 hourly workers in the U.S. since 2011 and has reported monthly sales gains for 72 consecutive months.

The layoffs come about three months after FCA CEO Sergio Marchionne said the automaker plans to eventually phase out production of the Chrysler 200 and the Dodge Dart. In January, Marchionne said the two models "will run their course," but the company has not said when production will end. Marchionne also has said FCA is looking for a partner to potentially build small cars for the automaker at some point in the future.

Marchionne is in the middle of refocusing the company's strategic plan and is shifting its North American production footprint to focus on SUVs and pickups in the U.S. and smaller vehicles in Mexico.

The Sterling Heights plant is widely expected to gain production of the next-generation Ram 1500 pickup that is currently made at Warren Truck Assembly. But the transition, if it happens, isn't likely to occur for about 18 months or more.

Until then, the remaining 1,900 workers will continue to work sporadically. The plant has been shut down for the majority of the year.

FCA spokesman Gualberto Ranieri declined to comment on when the company would provide additional details about the timing or details of its U.S. production plans.

FCA's decision to eliminate a shift at the plant also comes one day after Ford confirmed that it will build a new plant in Mexico to make small cars starting in 2018. General Motors, while also emphasizing truck production, is continuing to build small cars in the U.S. It laid off about 500 workers at the assembly plant where the Chevrolet Sonic is built last fall and has moved those workers to other plants.

6 reasons Ford picked Mexico for a new plant

On Tuesday, the UAW called Ford's decision "very troubling."

The union was more optimistic about FCA's move Wednesday.

"The company has been planning to increase its capacity to build more trucks and SUVs," Jewell said. "I believe that in the long term this move will be a positive one for our members and the company."

The Chrysler 200, while never viewed as perfect, was heralded as FCA's first competitive midsize sedan in years, and its design was initially praised by industry observers. The car also saved plant from being closed. In 2009, it was on a list of plants Chrysler planned to close as part of its bankruptcy reorganization.

Instead of closing the plant, FCA spent about $1 billion to retool it for the all-new Chrysler 200 and launched the new car in 2014 and sales rose to a high of 177,889 last year.

Still, sales of the Chrysler 200 have been falling faster than the overall decline of passenger car sales since November when the company cut back on dealer incentives.

Sales of all midsize cars have declined 2.2% over the first three months of this year, and sales of compact cars have declined 5.5%, according to Kelley Blue Book. Sales of the Chrysler 200, in contrast, have dropped 63% over the same period.

"This year continues to be a tough year for midsize sedans," said Jessica Caldwell, senior analyst for car shopping website Edmunds.com. "It is still the largest segment but ... their grip on the retail customer is definitely loosening."

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FCA is having more success with the sales of trucks and SUVs. Sales of the Ram were up 14.4% this year, and Jeep sales were up 17.3%. The automaker's plants in Detroit, Warren and Toledo are running six days a week and about 20 hours per day amid the most robust industry sales on record.

Long layoff looms at FCA's Sterling Heights plant

Contact Brent Snavely: 313-222-6512 or bsnavely@freepress.com. Follow him on Twitter @BrentSnavely.