April 23, 2009 - General Motors, Detroit MI

GM Considers Shutting Factories for Nine Weeks

General Motors might halt production at some of its U.S. factories for up to nine weeks this summer to combat slumping auto sales, according to people familiar with the plan.

GM Considers Shutting Factories for Nine Weeks

General Motors might halt production at some of its U.S. factories for up to nine weeks this summer to combat slumping auto sales, according to people familiar with the plan.

GM typically closes its facilities for two weeks in July to change production lines for new models. Much like over the winter holidays, the automaker might extend that scheduled shutdown at unproductive plants to help bring down the growing stockpile of unsold cars and trucks, particularly if sales remain at their depressed levels.

GM has yet to decide what factories it would close and for how long. A shutdown that began around Christmas lasted through much of January.

"We continue to work with the U.S. Treasury to revise our business plan to go faster and deeper as required by President Obama," said Greg Martin, a GM spokesman. "As part of the plan, we previously acknowledged we will idle several U.S. assembly, stamping and powertrain plants. We are currently finalizing our plans. It is our intent, as always, to tell our employees first."

As GM and Chrysler near government deadlines to finalize their efforts to cut costs and reduce debt, the magnitude of the possible reductions is starting to hit home. GM has said a bankruptcy filing is probable given the distance it still must travel to reach its restructuring targets.

Chrysler has until the end of April to broker stakeholder concessions as well as finalize an alliance with Italy's Fiat. GM must negotiate similar stakeholder sacrifices by June 1.

The negotiations between the Obama administration and Chrysler's bankers moved forward slightly yesterday as well, with the government making another proposal, sources close to the talks said.

The new government offer would have Chrysler's senior creditors cut the amount they are owed from $6.9 billion to $1.5 billion. In exchange, they would get a 5 percent equity stake in the company. The offer is far from what the creditors have been willing to accept, however, and negotiations are expected to continue.

Some industry players are growing increasingly concerned about the prospects of bankruptcy. The National Auto Dealers Association plans to meet with President Obama's auto task force today to lobby against bankruptcy. Association Chairman John McEleney warned that consumer confidence, the root of plummeting U.S. auto sales, would fall even lower if there's a bankruptcy filing.

"We're not naive," he said. "We understand it's a real possibility. But in this environment, in this economy, bankruptcy would accelerate the problem and push the country deeper into recession."

The association is also concerned about the mass closure of dealerships. As part of the mandated cost cutting, GM aims to accelerate its plans to trim its extensive dealer network to 4,100 by 2014. It had 6,200 dealerships at the end of 2008. Chrysler, which has far fewer dealers than GM, is planning to consolidate dealers by moving all three of its brands -- Chrysler, Dodge and Jeep -- under one roof.

Dealers are also lobbying their state legislators to enact more laws to protect their franchise investments should an automaker kill a brand. GM, for instance, announced that it intends to either sell or discontinue Saturn. Hummer and Saab, too, are up for sale.

Yesterday, White House Chief of Staff Rahm Emanuel and National Economic Council Director Lawrence H. Summers met with the 10 Democrats who represent Michigan in Congress to discuss the automakers' ongoing restructuring.

"The Administration is working diligently to help these companies reach agreement with all of their stakeholders," the delegation said in a statement. "We all recognize, however, that the Administration and the companies must continue to prepare contingency plans to avoid liquidation or a protracted restructuring process should the ongoing negotiations for out-of-court resolution fail."

Original Story - Washington Post