Chrysler To Halt All Production for a Month – Or More
By Chris Haak
Chrysler LLC announced late today that it is roughly doubling the length of its normal holiday shutdown period in an effort to both conserve cash and to allow customer demand to catch up to inventory levels. So, as soon as the last shift ends on Friday, December 19, Chrysler will not build another car or truck in North America until no sooner than January 19 at the earliest. Below is the full text of Chrysler’s statement:
Chrysler LLC Adjusts Production as a Result of the Deteriorating U.S. Credit Crunch
Auburn Hills, Mich., Dec 17, 2008 –
Due to the continued lack of consumer credit for the American car buyer and the resulting dramatic impact it has had on overall industry sales in the United States, Chrysler LLC announced that it will make significant adjustments to the production schedules of its manufacturing operations. In doing so, the Company will keep production and dealer inventory aligned with U.S. market demand. In response, the Company confirmed that all Chrysler manufacturing operations will be idled at the end of the shift Friday, Dec. 19, and impacted employees will not return to work any sooner than Monday, Jan. 19, 2009.
Chrysler dealers confirmed to the Company at a recent meeting at its headquarters, that they have many willing buyers for Chrysler, Jeep® and Dodge vehicles but are unable to close the deals, due to lack of financing. The dealers have stated that they have lost an estimated 20 to 25 percent of their volume because of this credit situation.
The Company will continue to monitor the production schedules of its manufacturing operations moving forward.
The “no sooner than” phrase is obviously the scariest part of the news. The short press release obviously was pretty short on details, leaving the potential of a lot of speculation about what will happen to Chrysler over the next two months. A few possibilities:
- They will re-start production where needed on January 19 after receiving a bailout
- They will not re-start production until a point after January 20 (when the Obama Administration has taken office) and have received a bailout
- They will not receive a bailout and will never resume production
The shutdown affects 46,000 hourly workers at 30 plants, including all assembly, powertrain, component and stamping operations. Under the terms of the UAW agreement currently in place, the company is required to continue to pay most of the union members’ salaries, but not those of any contract employees, and it is a little cheaper to not run a plant (including its electricity, water, heating, etc.) than to run it. Plus, Chrysler will not be consuming the raw materials or parts that go into the cars on the production line, so will be saving money from that standpoint.
Hopefully we’ll know soon what President Bush’s plans are for Chrysler and GM with regard to any potential short-term bridge loans. It now appears that both companies expect to be able to last past the end of the year – which is slightly better than they indicated during House and Senate hearings – but that doesn’t mean either company’s survival, and especially Chrysler’s, is guaranteed.
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