CHRYSLER TO IDLE PLANTS 30 DAYS
Chrysler said Wednesday that it would close all of its manufacturing operations for at least a month as it tried to whittle down a mountain of unsold vehicles.
The shutdown, which will idle 46,000 workers at 30 plants in the U.S. and Canada beginning Friday, is the latest -- and most dramatic -- move by an automaker to deal with the steepest plunge in auto sales since the early 1980s.
Workers will be paid during the shutdown with a combination of wages and government unemployment benefits.
Separately, merger talks between Chrysler and General Motors Corp. were renewed after Chrysler owner Cerberus Capital signaled willingness to give up part of its stake, according to a Wall Street Journal report late Wednesday.
In recent days, U.S., European and Asian automakers have announced production cutbacks in their North American operations, either temporarily closing some plants or slowing output at others.
Ford Motor Co. said Wednesday that it would close most of its North American plants during the first week of January, and General Motors said it would delay the construction of a new factory designed to build engines for its Chevy Volt extended-range electric car.
“The difference here is that instead of lowering production at targeted facilities, Chrysler is essentially shutting down the entire company,” said Jesse Toprak, executive industry analyst at auto information website Edmunds.com. “That’s something unusual.”
Chrysler, which formerly had planned to close its plants for nine days over the holidays, said all the plants would be closed from Saturday at least until Jan. 19. Four plants -- one in Canada and three in the United States -- will remain closed for a number of days after that, and other plants could also remain dark for longer periods, Chrysler said.
Automakers are being hammered by the global financial crisis, which has choked off lending for many car buyers. Chrysler, which also sells vehicles under the Jeep and Dodge nameplates, has suffered more than most, recording a 47% drop in year-over-year sales last month.
In November, it took dealers an average of 125 days to sell a Chrysler vehicle after it arrived on the lot, the longest among the six biggest players in the U.S. auto market, according to Edmunds.com. Ford was next at 95 days.
Japanese automaker Honda Motor Co. had the best showing at 55 days, but even Honda is slashing production and delaying new plants and product launches.
“The situation is worsening by the day and is showing no sign of recovery,” Honda Chief Executive Takeo Fukui said Wednesday at a news conference in Tokyo.
Part of the problem has been financial troubles at Chrysler’s and GM’s affiliated financing companies that are forcing many customers to go to banks or credit unions for financing. Chrysler said dealers are losing 20% to 25% of their sales because potential customers can’t get loans.
Just a few years ago, a customer could bring in a used vehicle with more due on the loan than the vehicle was worth and, with no money down, “drive away in a new set of wheels,” said Greg McBride, senior analyst at Bankrate .com.
The dealer would simply roll the unpaid balance of the old loan into a new loan.
“Now, you have to bring some money to the closing table,” McBride said. “Even someone with great credit is going to have a hard time getting credit if they don’t have money for a down payment.”
Jim Hossack, an industry analyst with AutoPacific Inc. in Tustin, said the recession and the sharp downturn in home prices and the stock market were also hurting U.S. automobile sales, which were down almost 37% in November compared with the same month last year -- the worst drop since January 1982.
Chrysler and GM have said they could run out of cash soon if they don’t receive emergency aid from the federal government. The White House is weighing a short-term rescue plan for the companies.
In a sign of the strain on its sales network, Chrysler Financial said it may temporarily stop financing showroom inventories because dealers are pulling large amounts of money out of a fund used to finance those loans.
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