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US automakers close factories
Published in The Saudi Gazette on 19 - 12 - 2008

General Motors Corp., Ford Motor Co. and Chrysler LLC will shutter about 59 factories over the next month as they struggle to adapt to the worst sales in 26 years and await a verdict on a US rescue of the industry.
The closings show how far automakers are going to conserve cash and prune output under the pressures of a shrinking US market, dwindling access to credit for dealers and demands for advance payments by some GM and Chrysler parts suppliers.
GM, Ford and Chrysler began another round of pullbacks on Wednesday, burdened by US sales declines this year of 22 percent, 19 percent and 28 percent, respectively, compared with the 16 percent industry-wide average.
Chrysler will shut all 30 of its plants for at least a month starting Dec. 19, and Ford plans to idle nine of 15 North American assembly plants in the first week of January.
Detroit-based GM said a new $370 million factory making engines for the Chevrolet Volt electric car is being delayed to conserve cash.
And GM may shrink the Pontiac division to a single model from six following a drop in sales every year since 1999, Mark LaNeve, North American sales chief, said in an interview.
Ford said its move was part of a previously announced plan to reduce first-quarter North American production by 38 percent. The second-biggest US automaker acted after GM's Dec. 12 decision to cut 250,000 units of production from its first- quarter North American plans, affecting 20 plants. That was equal to almost 30 percent of GM's 2008 first-quarter sales.
GM, which reported having $16.2 billion as of Sept. 30, needs at least $11 billion on hand to pay monthly bills. Chrysler ended last quarter with $6.1 billion and needs at least $3 billion to operate, Chief Executive Officer Robert Nardelli told Congress on Nov. 18. Ford has said it doesn't need emergency aid.
Chrysler owner Cerberus Capital Management LP, which initiated the move to resume merger negotiations with GM, has signaled a willingness to cut the value of its interest, the Wall Street Journal said.
GM spokesman Tony Cervone said Thursday the automaker's stance on the merger talks has not changed since it suspended them when it announced third-quarter earnings in November.
GM and Chrysler had been in talks earlier this year to combine, but financing emerged as one of the biggest obstacles.
Chrysler, GM and Ford Motor Co. have been taking dramatic steps as they struggle to survive the recession and US sales have dipped to their slowest rate in 26 years.
Chrysler and GM fear they might not have enough money to pay their bills in a matter of weeks.
“No one is immune,” said Ed Kim, director of industry analysis for consulting firm AutoPacific Inc. in Tustin, California. The industry is “imploding to a degree I've never imagined could happen, and at a speed I'd never expected.”
GM, the biggest US automaker, and No. 3 Chrysler are counting on President George W. Bush to approve emergency loans to help them stave off a collapse that would threaten millions of jobs. Without $14 billion in federal aid, the manufacturers will be out of money by early 2009, they say. GM and Chrysler have also reopened merger talks, the Wall Street Journal said on Thursday, citing people familiar with the discussions.
Bush told Fox News Channel on Wednesday he was still “thinking through” details of any government assistance. Congress deadlocked on a bailout last week, spurring the White House to reverse its stance and consider tapping money from the $700 billion bank-bailout fund.
“You need to have a hoard of cash built up from the good times to get you through the bad times,” said Dennis Virag, president of Automotive Consulting Group in Michigan. “The bad times are here, the bad sales are here and GM and Chrysler just don't have the cash.”


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