DETROIT (AP) - Thousands of GM workers could learn as early as
Thursday that they will be idle for up to nine weeks this summer as
the automaker's plants stop making all but its most popular cars
The move is a result of slumping sales and growing inventories
of unsold vehicles, but some analysts and dealers fear the plant
closings could further scare car buyers already made nervous by
talk of a GM bankruptcy.
General Motors Corp. is planning to temporarily close most of
its U.S. factories for up to nine weeks, three people briefed on
the plan said Wednesday. 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 shutdowns.
GM spokesman Chris Lee would not comment other than to say the
company notifies employees before making any production cuts
public. But UAW officials will likely raise questions about the
move during meetings they have scheduled at several factories
Thursday and Friday with plant managers and GM human resource
officials to discuss production changes.
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.
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 line speeds.
But 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.
GM 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.
Separately 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.
"They must be forecasting a sales level that is low enough
between now and the summer that they see their inventories
building," he said late Wednesday. "It's sort of an ominous
comment on what they see for the industry."
Libby also suggested that the company's sales may be declining
because customers are concerned about the automaker possibly filing
for bankruptcy protection.
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.
"Just using 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."
The 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.
Libby 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.
"Nine 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
Nearly all 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
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 production.