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GM to temporarily shut 13 plants, cut production
DETROIT -- General Motors Corp. said Thursday it will temporarily close 13 assembly plants in the U.S. and Mexico -- some for more than two months -- laying off nearly 24,000 workers to pare back a bloated inventory.
The closures, which will start in May, vary by factory from as short as three weeks to a long as 11, including the normal two-week July shutdown to change from one model year to the next.
GM said the shutdowns will help control high dealer inventories and bring manufacturing in line with sales. The company plans to cut production by 190,000 vehicles and reduce inventory from the current 767,000 to 525,000 by the end of July.
About 24,000 hourly and salaried employees will be laid off at the affected assembly plants, but there will be thousands more layoffs and temporary factory closures when GM works out its schedules for engine, transmission and parts stamping factories.
The troubled automaker has 22 assembly plants in North America as well as dozens of other parts and powertrain factories.
Laid-off hourly workers will get unemployment benefits and supplemental pay from the company that amounts to most of their base wages. Salaried workers also will get some income, GM North America president Troy Clarke said.
In a conference call with reporters, Clarke said the shutdowns are not a sign that GM is headed into bankruptcy protection.
Clarke would not say exactly how many workers would be laid off, nor would he say if any of the factories would be closed for good. GM has told the government it plans to close five more factories as part of its restructuring plan, and its chief executive officer said additional closures are possible.
He also said the company isn't making the cuts because it sees sales worsening beyond current projections.
"Instead of spending the whole year to get the inventory in line, we really needed to get it in line much quicker," he said.
GM normally shuts down its assembly plants for two weeks each summer to prepare for the new model year, but assembly plants that will see additional down weeks are in Arlington, Texas; Bowling Green, Ky.; Detroit-Hamtramck, Mich.; Flint, Mich.; Fort Wayne, Ind.; Lansing, Mich.; Lordstown, Ohio; Pontiac, Mich.; Shreveport, La.; Spring Hill, Tenn.; Wilmington, Del.; Wentzville, Mo.; and Silao, Mexico.
The longest shutdown is 11 weeks at Fort Wayne, where about 2,600 people make Chevrolet Silverado and GMC Sierra pickup trucks.
The Associated Press first reported Wednesday that GM planned to temporarily close most of its factories.
Clarke said he can't remember the company ever having as many layoffs and plant shutdowns. He said President Obama's auto task force was aware of the shutdowns, but the decisions were made by GM management.
Obama said through a spokeswoman that GM will have to make difficult decisions during its restructuring. "He is committed to standing behind GM during this process to achieve a strong, viable auto industry in the long-term," the spokeswoman said.
GM's move is a result of slumping sales, but some analysts and dealers fear the plant closings could further scare car buyers already made nervous by talk of a GM bankruptcy.
GM also said Thursday that it has been negotiating with its former parts arm, Delphi Corp., to make sure the supply of parts continues during Delphi's bankruptcy case. GM said it has proposed "fair and reasonable" terms that have been rejected by Delphi and its lenders.
"Without 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," GM's statement said.
The shutdown could be catastrophic to many auto parts suppliers that already are near bankruptcy due to previous production cuts. During the shutdown, suppliers couldn't ship parts to GM and would lose critical revenue.
"It's one of those things we've been dreading for a long time," said Jim Gillette, director of financial services at auto-industry consultant CSM Worldwide in Grand Rapids. "It's as bad as its ever been."
He said that many suppliers are making employee cuts or forcing workers to take furloughs to reduce operating expenditures.
GM is living on $13.4 billion in government loans and faces a June 1 deadline to cut its debt, reduce labor costs and take other restructuring steps. If it doesn't meet the deadline, the company's CEO has said it will enter Chapter 11 bankruptcy protection.
The Treasury Department declined to comment on any effect the plant shutdowns might have on GM's restructuring plans.
GM's sales were down 49 percent in the first quarter compared with the same period last year, and GM had a 123-day supply of cars and trucks at the end of March, according to Ward's AutoInfoBank. That's down from 162 days worth in January.
But as of March 31, the automaker had a more than six-month supply of several models including the Pontiac G5 compact and Chevrolet Silverado hybrid pickup truck.
Nearly all automakers with U.S. factories have closed plants or cut production to deal with the auto sales slump. Earlier this year, GM temporarily closed 20 factories across North America due to weak sales, some for the entire month of January. Chrysler LLC, also subsisting on government loans, closed all 30 of its manufacturing plants for a month in January to counter the auto sales downturn.
Ford Motor Co. also shut down 10 North American assembly plants for an extra week in January, and both Toyota Motor Corp. and Honda Motor Co. have cut production.