Magna Cuts 400 Jobs as Truck Downturn Bites

AURORA, ONTARIO, CANADA - Magna International Inc. recently announced it will lay off about 400 workers at its Formet Industries factory in St.Thomas, Ont. as the drop in sales of big trucks and sport utility vehicles works its way through from automakers to suppliers, according to the Financial Post.

"This is the first permanent layoff situation since the plant's inception, reflecting a considerable downturn in consumer demand for full-size trucks and a corresponding reduction in customer production volumes," the company said.

The layoffs, representing about one quarter of Formet's total workforce of 1,600, take effect Sept. 8 and will hit both salaried and factory workers, Magna said. The company, Canada's largest auto supplier, said it would provide a severance package to workers based on years of service and establish a re-employment action centre.

Formet is a manufacturing division of Magna's Cosma operating unit. It makes the entire chassis frame for General Motors Corp.'s full-size pickup trucks and SUVs.

Demand for those GM vehicles have collapsed amid a sharp rise in gasoline prices past US$4-a-gallon. Earlier this month, the automaker said it would shut down four trucks factories in North America, including its Oshawa, Ont. truck plant, in response.

About 30 percent of Formet's output is earmarked to supply GM's Oshawa truck plant, according to a company official.

Magna shares were trading down $1.06 at $70.48 on the Toronto Stock Exchange mid morning Wednesday. They've fallen 12 percent this year.

Aurora, Ont.-based Magna gets about 44 percent of its revenues in North America from Ford Motor Co., GM, and Chrysler LLC as of 2007. The company saw its external production sales on the continent decrease 4 percent, or $138-million, to $3.05-million in its most recent quarter because its Detroit customers cut their vehicle output. Magna's key programs with the Detroit automakers include GM's full-sized pickups and Envoy and Trailblazer SUVs, Ford's full-sized SUVs, the Hummer H3, and the Dodge Nitro.

Don Walker, Magna's co-chief executive, said in May he was concerned about Magna's exposure to GM's truck lines as he was concerned about minivan sales "and everything else" Magna supplies. "There is still going to be an underlying demand for certainly pickup trucks," he said. "It's anybody's best guess where it goes."

Magna did not disclose any information about another plant it has in St.Thomas, called Presstran.

The layoff announcement comes only weeks after workers at the Formet factory returned to work after being temporarily laid off as a result of a lengthy strike at GM supplier American Axle.