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Chrysler idles production

2008-12-18 07:58

Detroit - Citing a credit crisis and dwindling sales, Chrysler LLC on Wednesday said it would shut down all of its manufacturing operations from the end of this week for at least a month.

The blanket shutdown marked a deepening of the financial crisis for the embattled US auto industry and came as Chrysler and its larger rival General Motors Corp both seek to shore up cash as they seek a federal bailout they say they need to survive.

Chrysler, considered the weakest of the Detroit automakers, made the announcement on its plant shutdown in a letter sent on Wednesday to its employees, suppliers and the United Auto Workers union that was also posted on its website.

Chrysler said its dealers were getting car shoppers into showrooms but losing between 20% and 25% of those potential sales because of the lack of consumer financing for new car purchases.

"As a result of the financial crisis, the automotive market remains depressed due to the continued lack of consumer credit for potential buyers," the automaker said in a statement.

Separately, Chrysler said its finance arm could be forced to stop making loans dealers use to finance inventory because the dealers have been pulling money out from a fund that helps finance the floorplan loans.

The shutdown by Chrysler will idle plants in the United States, Canada and Mexico producing vehicles for its Chrysler, Jeep and Dodge brands.

The more than 30 000 Chrysler workers in the United States represented by the UAW receive nearly full benefits and wages during plant shutdowns, but labour costs represent only about 10% of the total cost of the average vehicle.

By idling plants, Chrysler and other automakers can cut costs on inventory, components and related charges such as utilities for operating large production facilities.

The moves also keep finished vehicle inventories from piling up on dealer lots and increasing the pressure for even greater discounting to consumers.

GM said last week that it was cutting its first-quarter production schedule by 60% compared with the same period a year earlier.

Privately held Chrysler is 80% owned by private equity firm Cerberus Capital Management.

Chrysler's sales plunged 47% in November and were down almost 28% for the first eleven months of 2008.

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