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Chrysler Shutting Down for One Month
With Rescue Unresolved, Other U.S. Automakers Also Plan Production Cuts

By Peter Whoriskey
Washington Post Staff Writer
Thursday, December 18, 2008 9:12 AM

Struggling U.S. automakers are launching a round of severe cutbacks as they wait for a government rescue, with Chrysler saying yesterday it will idle all 30 of its U.S. factories for one month.

Chrysler's plants will furlough 46,000 workers beginning Friday, as a planned two-week holiday shutdown is extended to a month and possibly longer. The company, which has told Congress it needed $7 billion to survive the month, also told dealers that it may suspend financing for new cars in a bid to conserve cash.

"No one will return to work any earlier than Jan. 19," Chrysler spokesperson Shawn Morgan said. "I don't want to get into speculating about what may happen after that. . . . We're going to continue to monitor the situation."

"If I were a Chrysler worker, I'd be worried that the plant won't reopen," said Brian Johnson, an industry analyst at Barclays Capital.

The moves come as other U.S. and foreign automakers are announcing steep production cuts that will idle tens of thousands of other U.S. workers as the industry copes with withered demand for new cars and trucks. Ford said yesterday that it would stop production for an extra week in January at all but two of its plants because of flagging consumer demand. General Motors said Friday that it will cut production and temporarily close 20 factories.

Honda and Toyota have also announced production cuts.

A plan to issue $14 billion in loans to the U.S. automakers died in the Senate last week, but the Bush administration has indicated it would consider using some of the $700 billion financial industry rescue program to help Detroit. "It's clear that the automakers are in a very fragile financial condition, and they're taking steps to deal with it," White House spokeswoman Dana Perino said yesterday. "We're aware of their financial situation and are considering possible policy options to provide assistance in an appropriate way. As we've said, a disorderly collapse of the auto industry should be avoided."

The industry shutdowns offer a sense of the kind of economic damage the domestic auto industry's collapse could cause. The Big Three -- GM, Chrysler and Ford -- employed about 240,000 U.S. workers at the end of 2007. Foreign automakers employed about 113,000 people in the United States.

The U.S. auto industry's suppliers employ an additional 975,000 people, according to the Center for Automotive Research in Ann Arbor, Mich. The furloughs "are a harbinger of things to come if these loans are not secured," said Dennis Virag, president of the Automotive Consulting Group in Ann Arbor.

Auto plants normally shut down over the winter holiday, but the new reductions extend the usual closures. Chrysler's plants had been scheduled to stop production from Dec. 24 to Jan. 2, but now will close Friday and stay dark until at least Jan. 19.

Two factories in Toledo that make the Jeep Liberty, Jeep Wrangler and Dodge Nitro will be closed until Jan. 26, the company said. A minivan plant in Canada and a plant in Detroit that makes the Dodge Viper will remain shut until Feb. 2.

Most of the workers will receive unemployment coverage equivalent to nearly full pay during the furloughs, officials said. Asked whether the announcement might be viewed as a means of influencing politicians who are weighing a bailout, Chrysler spokeswoman Mary Beth Halprin said, "This is really a response to what we're seeing in the marketplace. . . . We run plants when we have orders. We don't run plants when we don't have orders."

While the U.S. automakers have drawn most scrutiny because of their request for government aid, the downturn has battered Detroit's foreign competitors as well.

Honda has cut its annual forecast and said it will trim global production by more than 300,000 vehicles. Toyota said earlier this week that it will halt construction of a plant to build the Prius in Mississippi as sales of the fuel-efficient gas-electric hybrids have sagged along with gas prices and the economy.

"This is not just the Big Three who are in trouble," Virag said. "This is the entire U.S. auto industry, including domestic and transplants."

The overall downturn has made consumers skittish about big purchases, and the global credit crisis has made it harder for consumers to get loans to buy cars. Chrysler said yesterday that its dealers have lost as much as 25 percent of potential sales in recent months because buyers have been unable to line up financing.

For the first 11 months of this year, Chrysler sales were down nearly 28 percent from the same period last year.

Now, Chrysler says, it is approaching the minimum level of cash it needs and will have trouble paying its bills after Jan. 1. Chrysler is owned by private-equity firm Cerberus Capital Management, which bought the automaker for $7.4 billion in 2007.

Chrysler and GM warned last month that they could run out of cash by the end of the year without aid from the federal government. Chrysler expects to have only about $2.5 billion on hand by Dec. 31, the minimum needed to pay employees and suppliers and keep the company running.

The furloughs are "a grim reminder of a grim situation," Johnson said.

Staff writer William Branigin contributed to this report.

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