18 Dec 2008

Auto giant to halt production for a month

5:52 pm on 18 December 2008

Struggling American carmaker Chrysler is to halt production at all 30 of its plants for one month from Friday, affecting thousands of workers.

Ford Motor Company also announced on Wednesday it would extend its normal two-week Christmas shutdown at 10 of its North American plants for an extra week.

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

Officials said they will not reopen the factories until at least 19 January.

More than 30,000 unionised workers at US factories will receive nearly full wages and benefits during the shutdown, which Chrysler said was prompted by ongoing financial stress worsened by the global credit crunch and dwindling sales.

Chrysler sales plunged 47% in November and were down almost 28% for the first 11 months of 2008.

General Motors has said it would cut first-quarter production by 60% compared with the same period a year earlier.

On Wednesday, it suspended construction at an engine plant in Michigan integral to its long-term plans to build more fuel-efficient vehicles, and last week said it would shut down 30% of its North American production.

Pressure on government

The move by Chrysler puts new pressure on the Bush administration to quickly help the cash-strapped automakers.

Chrysler and General Motors had previously warned they would run out of money by the end of the year without government aid.

The White House had no comment on the Chrysler development on Wednesday, but leading Senate Democrats who have pressed for help said the decision to stop work, even temporarily, demonstrated that the government must act now.

Democratic lawmakers and industry sources have said that any emergency assistance is likely to cover General Motors and privately held Chrysler and total up to $US14 billion.

Ford Motor Co, the healthiest of the three, is not seeking immediate capital but has asked the government for a line of credit to be tapped only if its finances worsen more than expected in 2009.

Chrysler, General Motors and Ford fear that failure by one or more of them would drag down the others because of their shared supplier networks.

President George W Bush said the US automobile industry is critical to the entire nation's economy. A decision on the bailout needed to happen "relatively soon" and all options were being considered, he said.

The aid was expected to come from a $US700 billion fund established in October to rescue distressed banks and other financial institutions hit by the global economic downturn.