Chrysler turns off engine for a month
Nick Bunkley, Detroit
December 19, 2008
CHRYSLER will close all 30 of its factories for at least one month, in response to plunging vehicle sales in the United States.
The company said the plants, which employ 46,000 union workers, would close this week and resume production no sooner than January 19.
Some will remain closed for several more weeks. Normally, the Detroit car makers close their plants for about two weeks at the end of the year. In addition, Ford said it would extend the holiday shutdown at most of its plants to a third week.
Meanwhile, worries that Chrysler could be forced to file for bankruptcy have spooked many car dealers into borrowing so much money from the car maker's lending arm that the company said it might need to suspend the loans.
Dealers have been requesting nearly $US60 million ($A86 million) a day from a fund used to finance vehicle inventories, and a total of $US1.5 billion since July. Chrysler Financial's chief executive, Thomas Gilman, told dealers in a letter last week that the requests were "troubling" and he urged them not to borrow more than "what's absolutely necessary for the operation of your business".
US car sales are at their lowest in 26 years. Chrysler's sales were down 47 per cent last month, compared with a 37 per cent decline for the industry overall.
Chrysler's chief executive, Robert Nardelli, told Congress this month that the company needed an immediate loan of $US7 billion to help it survive into the new year. Senate Republicans blocked aid to Chrysler and the other Detroit car makers last week, but the Bush Administration is expected to step in with some form of aid.
General Motors, which has said it needs $US4 billion this month to stay afloat and another $US14 billion after that, said last week 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, the chairman of Sterling Heights Dodge and Meadowbrook Dodge near Detroit. "Hopefully, by Friday, the President OK's this thing. We just have to calm everybody down."
Mr Gilman's letter showed dealers were feeling jittery along with their would-be customers.
"They don't know what to do. They're just running wild," Mr Viviano said.
Without access to financing, few Chrysler dealers would be able to order new vehicles. "Chrysler Financial finances 75 per cent of all vehicles shipped to US dealers, and we continue to support our dealer body with uninterrupted wholesale financing," said Chrysler Financial spokeswoman Amber Gowen.
Chrysler said its dealers, during a recent meeting at the company's Michigan headquarters, told executives that they had lost 20 to 25 per cent 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 leaving their plants idle, car makers have been trying to save money by cutting their workforce.
Last month, Chrysler cut about 5000 salaried jobs through a buy-out and early retirement program. By the end of this month, it is expected to have eliminated more than 1800 hourly positions.
Workers at the plants will be laid off during the down time, but a supplemental unemployment program ensures they will continue to receive most of their pay.
NEW YORK TIMES
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