TOPICS > Economy

General Motors to Idle Plants for up to 10 Weeks

BY Admin  April 23, 2009 at 1:50 PM EDT

GM headquarters in Detroit; AP file photo

The closures will begin next month, the company said in a
statement. Shutdowns will vary by factory, but some will be closed for nine or
10 weeks. The troubled automaker has 22 assembly plants in North America.
Dozens of other factories stamp metal parts and build engines and
transmissions, and they also will see temporary closures.

GM normally shuts down its assembly plants for two weeks
each summer to prepare for the new model year, but assembly plants that will
see additional down weeks are in Arlington, Texas; Bowling Green, Ky.;
Detroit-Hamtramck, Mich.; Flint, Mich.; Fort Wayne, Ind.; Lansing, Mich.;
Lordstown, Ohio; Pontiac, Mich.; Shreveport, La.; Spring Hill, Tenn.;
Wilmington, Del.; Wentzville, Mo.; and Silao, Mexico.

The longest shutdown is 10 weeks at Fort Wayne, which makes
the Chevrolet Silverado and GMC Sierra pickup trucks.

Meanwhile, the New York Times reported Thursday afternoon
that the Treasury Department working on a Chapter 11 bankruptcy filing for Chrysler
that could happen as early as next week, according to sources people with
direct knowledge. Italian automaker Fiat would reportedly still complete an alliance
with Chrysler while the company is under bankruptcy protection.

It’s unclear what would happen to Chrysler’s $6.9 billion in
debt.

A report by the Government Accountability Office said Thursday
that the U.S Treasury would see a “small percentage” of recovery on the
loans it has given to Chrysler in case the automaker liquidates its assets in
bankruptcy, according to Reuters.

“According to Treasury, in the case of Chrysler, the
sale of the assets would result in cash equal to only a small percentage of the
value of the loans,” the GAO, the investigative arm of Congress, said in
the report.

Meanwhile, the National Automobile Dealers Association said President
Barack Obama’s auto task force might expand Small Business Administration loan
requirements so dealers could more easily borrow money to stock their showrooms.

NADA chairman John McEleney said the task force is working
with other federal agencies to find alternatives to help dealers get loans to
buy cars to stock their lots, as credit markets remain frozen.

The NADA met with the task force Thursday, as General Motors
and Chrysler race to make deep cuts to receive more federal aid.

McEleney says the task force is also looking at how nearly
500,000 employees at GM and Chrysler dealerships in the U.S. would be affected
should either company file for bankruptcy.

Regarding GM’s plant shutdowns, North America President Troy
Clarke said that the company has been controlling inventories since the first
of the year, but it needs to do more.

“While sales have been performing at or close to our
plan estimates, and dealer inventories have been reduced accordingly, we want
to more closely align inventories with even more conservative market
assumptions,” he said in a statement.

The move is a result of slumping sales, but some analysts
and dealers fear the plant closings could further scare car buyers already made
nervous by talk of a GM bankruptcy.

The shutdown comes amid shrinking sales for GM and other automakers.
GM’s sales were down 49 percent at the end of March compared to the same time
last year. The industry as a whole has seen sales shrink by 38 percent. GM has
lost about $70 billion in the last two years.

The company has already taken $13.4 billion in government
loans, and is racing to meet a June 1 deadline to come up with a turnaround
plan. If its plan is not approved, GM’s CEO has said the company will file for
Chapter 11 bankruptcy protection.

The shutdown decision is a sign that the company doesn’t
forecast sales figures improving any time soon, auto analyst Tom Libby told the
AP.

“They 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.”

Elbert Harvard IV, who works at GM’s Orion, Mich. plant
attaching doors to sedans, told the Detroit Free Press that he understands the
need for the shutdown.

“If we’re making cars nobody is buying, then I think that’s
more negative for the company than for us,” Harvard said. “I hate not
to work. But it makes sense why they would have to do that.”

Thousands of workers will be laid off during the shutdown,
but many will still receive about 70 percent of their pay, because union
contracts require GM to make up much of the difference between state
unemployment benefits and full pay.

Almost all automakers with U.S. factories have closed plants
or cut production as a result of the 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 closed all 30 of its manufacturing
plants for a month 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. cut production.