U.S.’ Big Three Car Firms to Idle Plants to Cut Inventory
Plant shutdowns to control growing inventories of unsold cars and trucks will spread next week as the major U.S. auto makers cope with a weakening auto market, the firms said Wednesday.
DaimlerChrysler’s Chrysler group said that it will idle three North American vehicle assembly plants next week to reduce growing inventories.
The temporary plant shutdown, which was widely expected, comes as the former Chrysler Corp. struggles to return to profitability after a disastrous third quarter and amid signs of a slowing U.S. economy.
The affected plants are in Bramalea, Canada, where the Chrysler Concorde, 300M, LHS and the Chrysler and Dodge Intrepid sedans are manufactured; Jefferson North in Detroit, home of the Jeep Grand Cherokee sport-utility vehicle; and Toledo, Ohio, where the Jeep Cherokee and Wrangler are made.
The Chrysler shutdown will affect 13,600 unionized workers, or about 15% of its U.S. and Canadian unionized work force of 88,000. U.S. workers will receive 95% of their after-tax, straight-time pay, while Canadian workers will get 65% of their pretax base pay.
Plant shutdowns directly affect earnings because auto makers count revenue from new vehicles when they are built rather than when they are sold by dealerships.
DaimlerChrysler idled its Belvidere, Ill., plant, where it makes the Chrysler and Dodge Neon compact car, for three days this week, in addition to the Thanksgiving holiday today and Friday.
“One of the old laws of the auto industry is when Chrysler sneezes, GM and Ford catch cold,” said Salomon Smith Barney analyst Michael Ward. “At some point, I think the whole industry has to confront the issues that Chrysler is confronting. Your inventories are too high, you keep producing out of whack and . . . you have to get these [consumer] incentives down. Until you do that, profitability continues to erode.”
Meanwhile, General Motors Corp. said it will shut down its Janesville, Wis., medium-duty truck cab-chassis plant next week, also to cut inventories.
GM has already idled five North American vehicle assembly plants this week, four to reduce inventories.
Ford Motor Co. said it will idle two plants next week. Its Avon Lake, Ohio, plant, where the Mercury Villager and Nissan Motor Co. Quest minivans are made, will be shut down, as it has several times this year, because of rising inventories.
On the New York Stock Exchange, DaimlerChrysler shares rose 23 cents to close at $39.08, while GM stock slipped 63 cents to $50.69 and Ford declined 56 cents to $23.81.
