Chrysler, Ford extend holiday shutdowns to save cash
— -- As automakers await a White House decision on federal loans, they took more steps Wednesday to save their dwindling cash and cut production to keep pace slower sales.
Chrysler said it would add two weeks to its scheduled two-week holiday shutdown of production facilities — all 30 of its plants will be idle until at least Jan. 19. General Motors gm had already announced production cuts beyond its holiday shutdown, and Ford Motor f said Wednesday that 10 plants will close the week of Jan. 5 as part of its plan to cut output.
Workers get vacation pay for the normal holiday shutdown, then will receive unemployment benefits and supplemental pay from the company that total about 85% of their normal pay.
GM, meanwhile, put the brakes on construction of a Flint, Mich., plant that would make 1.4-liter engines for its upcoming Chevy Volt plug-in electric car and its compact Chevrolet Cruze.
GM and Chrysler have said they need about $4 billion immediately to avert running out of cash in January. Ford says it has enough cash for now.
The White House, which has indicated it will aid the U.S. automakers, said it was aware of the latest GM and Chrysler moves, but gave no hint of when a plan would be announced. It has been expected this week.
"It's clear that the automakers are in a very fragile financial condition and they're taking steps to deal with it," press secretary Dana Perino said. "We're aware of their financial situation and are considering possible policy options to provide assistance in an appropriate way. As we've said, a disorderly collapse of the auto industry should be avoided."
Meanwhile, signaling that the car sales decline is global and deepening, Japan's Honda Motor issued its third profit warning this year, slashing its operating forecast by two-thirds. The revision could touch off similar moves at Japanese rivals Toyota and Nissan. All are reeling from falling sales and the dollar's 13-year lows vs. the yen.
Chrysler, in a statement, said dealers are unable to close sales and estimate that 20% to 25% of their volume has been lost due to tight credit.
Chrysler has said its cash will drop to $2.5 billion by Dec. 31, the minimum needed to meet payroll, pay suppliers and run the company. Privately held by Cerberus Capital Management, it is seeking $7 billion in loans to get through 2009.
GM, which is seeking up to $18 billion in federal loans for 2009, announced plans in September for the new engine plant, and said production would begin in 2010. But GM now must delay big-ticket items needed to build the factory, such as structural steel, spokeswoman Sharon Basel said.
Basel said Volt and Cruze development will continue as scheduled, and GM still plans to bring them to showrooms in 2010. Basel said there is plenty of time to build the factory, install equipment and get it up and running in time to produce engines for the two new cars. The company already makes the 1.4-liter engine at a plant in Austria, she said, giving it another option.
Honda CEO Takeo Fukui, announcing the revision, told reporters, "The sudden change in the global auto industry from mid-September, triggered by the financial crisis, has forced all automakers to alter various plans over a short period of time. The situation is worsening by the day and showing no sign of recovery."
Honda said it now expected an operating profit of just 180 billion yen ($2 billion) in the year to March, down 67% from the 550 billion yen it forecast in October.
Honda revised down its assumption for the dollar to average 95 yen in the second half, but this is still more favorable than the current rate of 88 yen. Every one-yen swing in the dollar affects Honda's annual operating profit by 20 billion yen ($220 million).