Chrysler Begins One-Month Shutdown

By: CBS News
By: CBS News

DETROIT - Chrysler LLC said Wednesday that it is closing all 30 of its manufacturing plants for a month starting Friday as it seeks to counter the most severe downturn in U.S. auto sales in more than two decades.

By extending the traditional two-week holiday shutdown period, the struggling Auburn Hills, Michigan-based automaker can adjust production to slowing demand and conserve cash.

In a statement Wednesday, Chrysler said tighter credit markets are keeping would-be buyers away from its showrooms. The company said its dealers are unable to close sales for buyers due to a lack of financing, and estimate that 20 to 25 percent of their volume has been lost due to the credit situation. Sales in November slid 47.1 percent.

Chrysler and larger rival General Motors Corp. have warned they could run out of cash within weeks without financial aid from Washington. Chrysler has said its cash will drop to $2.5 billion by Dec. 31, the minimum needed to meet payroll, pay suppliers and run the company. It would have trouble paying bills after the first of the year.

Operations will be idled at the end of the shift on Friday, Dec. 19th shift. the earliest plants will reopen is Jan. 19, 2009. A few plants will reopen on Jan. 26.

Chrysler is seeking $7 billion in government loans as it tries to survive the recession and the worst U.S. auto sales slump in 26 years. For the first 11 months of this year, Chrysler sales are down 27.7 percent to 1.4 million vehicles from 1.9 million for the same period last year.

With the U.S. sales slump expected to continue into January, traditionally one of the slowest sales months of the year, the company has little revenue coming in and must pay suppliers $7 billion every 45 days.

In the case of some plants, such as the Toledo Jeep plant in Ohio, operations will resume January 26, but with one less shift. More than 750 workers are being cut on the second shift at the Toledo North plant, said Dan Henneman, United Auto Workers union official for Local 12.

Chrysler's Jeep Liberty, Nitro and Wrangler are assembled at the Ohio plants. Sales of the company's Jeep-brand vehicles fell 41.8 percent in November to 20,302 units.

Henneman said 755 people worked the shift. About 550 workers took a retirement package and 200 will be indefinitely laid off.

Meanwhile, Ford confirmed it will shut down 10 of its North American assembly plants for an extra week in January due to the slumping U.S. auto market.

Spokeswoman Angie Kozleski says the normal two-week holiday shutdown will be extended to Jan. 12 at all operating assembly plants except those in Claycomo, Mo., near Kansas City and the Dearborn, Mich., truck plant.

Those two plants will return to work as normal on Jan. 5. Both make the new F-150 pickup truck, while Claycomo also makes the Ford Escape and Mercury Mariner.

Ford will also extend the shutdown at some engine, transmission and parts stamping plants, or shut portions of them to match production cuts at the assembly plants.

As President Bush's advisers ponder a rescue deal for the auto industry, the administration faces competing pressures from lawmakers in different congressional factions as it reviews its options for a bailout.

Conservative Republicans implored the White House not to use money from the $700 billion bailout for the financial sector to aid carmakers. A leading House Democrat, meanwhile, said the government should secure veto power over the companies' business decisions as part of any aid.

On Monday, President Bush suggested that a bailout package would come sooner rather than later. "An abrupt bankruptcy for autos could be devastating for the economy," Mr. Bush said. "This will not be a long process because of the economic fragility of the autos."


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