GM Reducing Output To Align With Demand
23 April 2009 - 9:28PM
Dow Jones News
General Motors Corp. (GM) announced Thursday plans to
temporarily idle 13 North American factories this summer, slashing
production by 190,000 vehicles as it races to shrink bloated
inventories. GM said the shutdown also will help protect against an
unplanned work stoppage the company worries could result from
stalled negotiations over bankrupt parts maker Delphi Corp.
(DPH).
The move comes as GM struggles to stay afloat on government
loans and faces a deadline imposed by the Obama administration to
dramatically restructure or go bankrupt by June 1.
Halting production will further erode revenue for GM, burning
through billions in the worst sales environment in decades. GM's
sales are down 40% through March compared to last year. The cost of
continuing to pump out cars and trucks, however, would be
greater.
The auto maker is saddled with excess inventories, which already
are heavily discounted.
"By reducing our inventories even more aggressively we reduce
pressure on GM and our dealers, and set ourselves up well for a
clean 2010 model year start-up," Troy Clarke, GM North America
president, said.
GM said the downtime also will protect the company against a
parts shortage should Delphi, the company's former parts arm, fail
to continue operating. The auto maker, in a news release, said
lenders to Delphi have rejected a proposal that would resolved
Delphi's bankruptcy case and ensure supply of parts to GM.
"Without the successful resolution of this dispute, it is
General Motors' view that Delphi or its lenders could force GM into
an uncontrolled shutdown, with severe negative consequences for the
U.S. automotive industry," the release said.
GM's hourly workers, represented by the United Auto Workers,
will get most of their pay during the shutdown from a combination
of state unemployment benefits and payments from GM.
-By Sharon Terlep, Dow Jones Newswires; 248-204-5532;
sharon.terlep@dowjones.com.