Chrysler shutdown to idle 46,000 for month

A signal of dire future if no auto aid comes?

BY JUSTIN HYDE and KATIE MERX • FREE PRESS BUSINESS WRITERS • December 18, 2008

Chrysler LLC announced Wednesday it would shutter all 30 of its factories for one month and idle 46,000 workers, while General Motors Corp. said it was delaying a key supply plant for the Chevrolet Volt, as both attempted to avoid imminent collapse while the Bush administration pondered a rescue.

Chrysler's move signals the first of a cascade of dire actions that will result if the automakers don't receive government aid, a person close to the situation said. Following a 47% decline in sales last month, some Chrysler plants are to be closed until February.

The Wall Street Journal reported late Wednesday that merger talks involving GM and Chrysler had resumed. The talks were suspended in late October when the Bush administration expressed reluctance to provide money for a merger that could result in thousands of jobs lost.

But the Journal said Chrysler's majority owner, Cerberus Capital Management, under pressure from some members of Congress to put more money into Chrysler, restarted the talks and indicated willingness to surrender part of its stake in the company.

Chrysler and GM have said they need at least $8 billion by the end of the month to avoid bankruptcy and at least $14 billion to get through the first quarter.

"It's clear that the automakers are in a very fragile financial condition, and they're taking steps to deal with it," said White House spokeswoman Dana Perino. "We're aware of their financial situation and are considering possible policy options to provide assistance in an appropriate way. As we've said, a disorderly collapse of the auto industry should be avoided."

While President George W. Bush and other officials have promised to act since the Senate blocked a rescue last Thursday, auto dealers and other industry supporters say the wait is damaging the rest of the economy.

"Manufacturing makes up the backbone of this economy, and that backbone is being broken," said Sen. Debbie Stabenow, D-Mich. "This administration must act now to preserve the middle class and protect our economy."

"Time is of the essence," said Annette Sykora, chairwoman of the National Automobile Dealers Association. "A lot of people are depending on the White House to provide the bridge loans to prevent a collapse of the auto industry. We need action now."

Chrysler said Wednesday that it would double a planned shutdown of all 30 North American plants from nearly two weeks to one month -- starting Friday through Jan. 19 -- citing sluggish sales. Chrysler said a lack of consumer credit had kept even willing buyers from closing on sales over the past couple of months.

"The dealers have stated that they have lost an estimated 20% to 25% of their volume because of this credit situation," the company said in a statement.

Chrysler spokeswoman Shawn Morgan said the Windsor minivan plant and Detroit's Conner Avenue sports car assembly plants are to be closed for the entire month of January. Both Toledo Jeep plants are to be closed until Jan. 26.

Chrysler's plants typically are shut down from Christmas Eve through New Year's Day. This year, they already were scheduled to be idled from Dec. 22 through Jan. 2.

Workers are to be considered laid off for the additional two to four weeks their plants are shut down.

"It comes as no surprise to me," said Eddie Gordish, a skilled trades worker at Jefferson North Assembly in Detroit. "All of a sudden, everything seems so crazy, so dire."

Meanwhile, GM said it was temporarily halting work on a new engine plant in Flint that is slated to build four-cylinder engines for the Chevrolet Volt electric vehicle and Chevrolet Cruze compact car. GM said the move did not change the deadline for building the Volt in late 2010, and would save money on construction materials in the near-term.

"It's temporarily on hold as we assess our cash situation," said GM spokeswoman Sharon Basel. "I don't think it's a surprise that we're studying and reviewing everything given the position we're in."

Ford Motor Co., which isn't seeking immediate federal aid, also said Wednesday that it would add an extra week to its two-week holiday shutdown at 10 North American plants, with the exception of two plants, which build the F-150 pickup.

GM announced plans to build the $349-million engine plant in Flint in September and told Congress it was spending $758 million on developing the Volt and its engine technology through 2012.

Both the Volt and the Cruze, a sedan expected to get 40 miles per gallon, have been touted by GM as examples of its commitment to more fuel-efficient models. The delay by GM follows word from Toyota Motor Co. on Monday that it was halting work on a Mississippi factory that would have built a new version of the Toyota Prius hybrid.

"These delays due to a cash crunch make it clear that without federal investment, the green revolution could come to a screeching halt," said U.S. Rep. John Dingell, D-Mich. "The sooner we get this bridge loan to Detroit, the better chance we have of getting more green cars into showrooms quickly."