Fiat Chrysler announced recently that it will cut third shift operations at its Belvidere production facility in May. The plant produces the Jeep Cherokee. The company cited global demand as part of the reason. On this week's Friday Forum, we learn how the decision could have a much larger ripple effect on the economy.
The shift change will affect 1,371 jobs.
Brian Harger is a researcher with the Northern Illinois University Center for Governmental Studies. He predicts the economic impact of the decision will be felt, but also expects laid off workers to be in hot demand so they'll probably land on their feet.
It's not the first time Chrysler scaled back operations in Belvidere. More than a decade ago, Harger ran an impact analysis on what cutting third shift operations would mean to the northern Illinois economy.
In addition to the direct loss of jobs, he studied the extent of "indirect" losses.
"That will probably be the next story; suppliers over time being eliminated and eventually jobs being eliminated," Harger said.
These could include hauling contractors and suppliers for individual components like doors and tires.
"Generally, the auto manufacturer wants to have those key suppliers close to them so that they can deliver almost immediately to the plant based on the day's production."
His model estimates an additional 1,332 indirect job losses over time.
The lay-offs hit the area's skilled workers which Harger says will lead to "induced" losses on local spending. This could affect healthcare providers and retailers.
"Each of those employees has a fairly high disposable income," Harger explained. "Obviously if they lose their job or they get transferred to another plant that income leaves the area."
Harger estimates total GDP losses to be around $466 million.
"That sounds like a huge figure, but it actually represents about 1.4 percent of the region's total GDP," Harger said. "So while this is a significant loss of the economy, I would not categorize it as a fatal episode by any means."
He says the business climate is also different this time around.
"This is going on at the time when I think the regional economy is a lot stronger," Harger added. "The regional job market is a lot stronger than it was in 2006 or in 2009, when the plant and the company were in serious trouble."
He says many of the workers have skills transferable to a growing market.
"A lot of the skill sets of auto workers compare pretty favorably to workers in the aerospace industry," Harger noted. "So it's probable that some of those people will get absorbed there eventually."
Still, Harger thinks the timing of the announcement was troubling.
"I think it was probably unfortunate that Chrysler announced that on the same day that they announced that they were making investments into their plants in Michigan," he said.
Harger's best guess is that it's less reflective of the Belvidere plant or the Illinois economy and more of what's going on in the auto industry overall.