Shutdowns grow

Plunging sales bring longer year-end closings for automakers

December 18, 2008|By New York Times News Service

DETROIT - Chrysler LLC said yesterday that it would close all 30 of its factories for at least one month, starting at the end of this week, in response to plunging vehicle sales in the United States.

The company said the plants, which employ 46,000 union workers, would resume production no sooner than Jan. 19. Some will remain closed for several more weeks. Normally, the Detroit automakers close their plants for about two weeks at the end of the year.

In addition, Ford Motor Co. said yesterday evening that it would extend the holiday shutdown at 10 of its North American assembly plants to a third week. Spokeswoman Angie Kozleski said the normal two-week holiday shutdown will be extended to Jan. 12 at all operating assembly plants except those in Claycomo, Mo., near Kansas City, and a Dearborn, Mich., truck plant. Ford will also extend the shutdown at some engine, transmission and parts stamping plants, or shut portions of them to match production cuts at the assembly plants.

Meanwhile, worries that Chrysler could be forced to file for bankruptcy protection have spooked many auto dealers into borrowing so much money from the automaker's lending arm that the company said it might need to suspend the loans.

Dealers have been requesting nearly $60 million a day from a fund used to finance vehicle inventories, and a total of $1.5 billion since July, Chrysler Financial's chief executive, Thomas F. Gilman, told dealers in a letter dated Dec. 12. Gilman called the requests "troubling" and urged dealers not to borrow more than "what's absolutely necessary for the operation of your business."

The announcements come with vehicle sales in the United States at the lowest level in 26 years. Chrysler's sales were down 47 percent in November, compared with a 37 percent decline for the industry overall.

Chrysler's chief executive, Robert L. Nardelli, told Congress this month that the company needed an immediate loan of $7 billion to help it survive into the new year.

General Motors Corp., which has said it needs $4 billion this month to stay afloat and another $14 billion after that, said last week that it would shut 20 assembly plants in North America for at least part of the first quarter.

"People just don't want to buy cars," said Anthony Viviano, chairman of Sterling Heights Dodge and Meadowbrook Dodge near Detroit.

Gilman's letter, first reported yesterday by Bloomberg News, showed that dealers were feeling jittery along with their would-be customers.

"They don't know what to do. They're just running wild," Viviano said.

Without access to financing, few Chrysler dealers would be able to order new vehicles. "Chrysler Financial finances 75 percent of all vehicles shipped to U.S. dealers, and we continue to support our dealer body with uninterrupted wholesale financing," said a Chrysler Financial spokeswoman, Amber Gowen.

Chrysler said its dealers, during a recent meeting at the company's headquarters in Auburn Hills, Mich., told executives that they had lost 20 percent to 25 percent of their volume because consumers were unable to obtain loans.

"They have many willing buyers for Chrysler, Jeep and Dodge vehicles but are unable to close the deals, due to lack of financing," Chrysler said in a statement.

In addition to idling their plants, automakers have been trying to save money by shrinking their work force.

Chrysler announced in October that it was accelerating the closing of its Newark, Del., assembly plant, where 1,000 people make Dodge Durango and Chrysler Aspen sport utility vehicles. The Delaware plant, which is slated to close by year's end, employs about 250 residents of Cecil County, Md., Roy S. Clough, deputy director of the Cecil County Office of Economic Development, said at the time.

In November, Chrysler cut about 5,000 salaried jobs through a buyout and early retirement program. By the end of this month, it is expected to have eliminated more than 1,800 hourly positions.

Workers at the plants will be laid off during the downtime, but the companies' jobs bank program ensures that they will continue to receive most of their pay. The United Automobile Workers union agreed this month to suspend the jobs bank to help the companies save money, but it is unclear when that change will take place; after it does, workers will receive only unemployment benefits.

Foreign automakers have been reacting to the sales slowdown, too. Toyota Motor Corp. said this week that it would delay work on a new factory in Mississippi that would build the Prius hybrid sedan, and Honda Motor Co. said it was cutting first-quarter production by 119,000 vehicles.

The Associated Press contributed to this article.

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