Push continues to come to shove; tens of thousands more to be unemployed this summer.
General Motors Corp. is planning to temporarily close most of its U.S.
factories for up to nine weeks this summer because of slumping sales
and growing inventories of unsold vehicles, three people briefed on the
plan said Wednesday. Analysts say the company could be seeing sales
decline because of talk about a potential bankruptcy.
The exact dates of the closures are not known, but the people said
they will occur around the normal two-week shutdown in July when
changes are made from one model year to the next. None of the people
wanted to be identified because workers have not yet been told of the
GM spokesman Chris Lee would not comment other than to
say the company notifies employees before making any production cuts
One of the people briefed on the plan said details are
still being worked out. Some of the closings could be staggered between
mid-May and the end of July, but the exact number of plants to be idled
has not yet been determined.
Another person said a few plants that make more popular models could
remain open for part of the shutdown period, but at reduced assembly
Thousands of workers could be laid off but would
still get most of their pay because their United Auto Workers union
contract requires the company to make up much of the difference between
state unemployment benefits and their wages. UAW officials at several
factories said they have meetings scheduled Thursday and Friday with
plant managers and GM human resource officials to discuss production
The shutdown could be catastrophic to many auto parts
suppliers that already are near bankruptcy due to previous production
cuts. During the shutdown, suppliers couldn't ship parts to GM and
would lose critical revenue.
"It's one of those things we've been
dreading for a long time," said Jim Gillette, director of financial
services at auto-industry consultant CSM Worldwide in Grand Rapids.
"It's as bad as its ever been."
He said that many suppliers are making employee cuts or forcing workers to take furloughs to reduce operating expenditures.
is living on $13.4 billion in government loans and faces a June 1
deadline to cut its debt, reduce labor costs and take other
restructuring steps. If it doesn't meet the deadline, the company's CEO
has said it will enter Chapter 11 bankruptcy protection.
The Treasury Department declined to comment on any effect the plant shutdowns might have on GM's restructuring plans.
Wednesday, GM announced that it may miss a $1 billion bond payment also
due June 1 if its debt-for-equity exchange is still in progress by
then. GM also could go into bankruptcy protection, which could make the
company miss the payment as well.
The company plans to make the
exchange offer soon to bondholders, perhaps as early as next week. GM
has $28 billion in unsecured bond debt and is under government pressure
to reduce that to solidify its balance sheet.
GM's sales were
down 49 percent in the first quarter compared with the same period last
year, and GM had a 123-day supply of cars and trucks at the end of
March, according to Ward's AutoInfoBank. That's down from 162 days
worth in January.
But as of March 31, the automaker had a more
than six-month supply of several models including the Pontiac G5
compact and Chevrolet Silverado hybrid pickup truck. The lengthy
shutdown likely means that GM doesn't see its sales rebounding anytime
soon, said Tom Libby, an independent Detroit-area auto industry analyst.
must be forecasting a sales level that is low enough between now and
the summer that they see their inventories building," he said. "It's
sort of an ominous comment on what they see for the industry."
also suggested that the company's sales may be declining because
customers are concerned about the automaker possibly filing for
GM CEO Fritz Henderson has said the
company would prefer to restructure outside of court, but it is
preparing for a prearranged bankruptcy as well as one in which good
assets would be separated from underperforming ones.
the word bankruptcy, their (market) share is down a lot just because of
this talk," Libby said. "They may be counting on a further decline."
plant closures add to the onslaught of bad news coming out of GM, said
John Clark, president of Avenue Chevrolet, a dealership in Batavia,
Ill., near Chicago.
"Henderson making statements about bankruptcy
sure doesn't help his cause, and all of the sudden we have this," he
said. "I've been getting calls from customers about warranties. I can't
see this as a positive move."
The government has said it would guarantee GM and Chrysler warranties as the companies restructure.
did say GM should be applauded for not building too many vehicles and
then having to spend big on rebates and other incentives to move them,
something the Detroit Three have been guilty of in the past.
Other GM dealers said a shutdown of up to nine weeks is jarring, but not unexpected given the sales slump.
weeks seems like an awful long time, but the way business is, not an
awful lot of cars are being sold anyway," said George Tasker, fleet
manager at Martin Chevrolet in Torrance, Calif.
Tasker said the
move wouldn't affect business, as dealers would "get together and trade
more easily" to find the exact car a customer wanted.
automakers with U.S. factories have closed plants or cut production to
deal with the auto sales slump. Earlier this year, GM temporarily
closed 20 factories across North America due to weak sales, some for
the entire month of January. Chrysler LLC, also subsisting on
government loans, closed all 30 of its manufacturing plants for a month
in January to counter the auto sales downturn.
Ford Motor Co.
also shut down 10 North American assembly plants for an extra week in
January, and both Toyota Motor Corp. and Honda Motor Co. have cut