UPDATE: GM Reducing Output To Align With Demand
23 April 2009 - 10:18PM
Dow Jones News
General Motors Corp. (GM), hit by a dramatic and prolonged sales
decline, will slash production by 25% this summer as it temporarily
idles 13 North American Assembly plants.
GM North American Chief Troy Clarke said Thursday the shutdown
is the biggest he can recall for the auto maker, struggling to
survive on government loans.
The auto maker will build 190,000 fewer vehicles between now and
July as it idles plants for up to eight weeks.
Affected factories build slow-selling and outdated models such
as the Cadillac STS sedan and full-size SUVs like the Chevrolet
Suburban. But plants building newer models including the recently
launched Chevrolet Traverse crossover also are on the list.
The move comes as a deadline imposed by the Obama administration
to dramatically restructure or go bankrupt nears. While the company
scrambles to avoid a bankruptcy, Chief Executive Fritz Henderson
has said in recent weeks a Chapter 11 filing has become more
"probable."
Clarke said GM consulted with the administration's automotive
task force on the decisions, but was not pressed into making the
cuts.
"It was an internal decision," he said.
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. And dealers must
pay interest on vehicles that sit on lots. "The units don't get
better while they're sitting up there," Clarke said.
GM said the downtime also will protect the company against a
parts shortage should Delphi Corp. (DPHIQ), the company's bankrupt
former parts arm, fail to continue operating.
The auto maker, in a news release, said lenders to Delphi have
rejected a proposal that would have resolved Delphi's bankruptcy
case and ensures the supply of parts to GM.
"We're trying to protect ourselves," Clarke 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; 248-204-5532; sharon.terlep@dowjones.com.