Chrysler - One Down. Two To Go.

Is this the harbinger of the Big Two?

Chrysler announced on Wednesday that it will close all 30 of its auto manufacturing plants for at least a month starting at the end of shifts on Friday as it tries to conserve cash and avoid bankruptcy amid plunging demand for its vehicles.

The third-largest U.S. automaker said that it is taking the action to bring its inventories more into line with reduced U.S. demand for new cars and trucks. It blamed its current difficulties largely on customers' inability to obtain financing to purchase new vehicles and said tight credit markets were discouraging would-be buyers.

Chrysler said manufacturing operations would resume at the earliest on Jan. 19. Two factories in Toledo, Ohio, that make the Jeep Liberty, Jeep Wrangler and Dodge Nitro will be closed until Jan. 26. A minivan plant in Canada and a plant in Detroit that makes the Dodge Viper will remain shut until Feb. 2.

A total of 46,000 employees will be affected. The workers will be paid during the time off through a combination of state unemployment benefits and Chrysler contributions, but they will not receive the full amount of their working pay.

~ ~ ~

Chrysler (in fact, most automakers) normally shuts down operations between Dec. 24 and Jan. 5. This closure would add roughly two weeks to that shutdown.

On the heels of the Chrysler shutdown announcement, Ford Motor Company said that it would extend the holiday shutdown at most of its plants to a third week.

~ ~ ~

Auto sales have been bludgeoned by tight credit and the struggling economy. Overall auto sales in the United States were down 37% last month compared with November 2007. Chrysler's situation was especially bad: its sales dropped a whopping 47%.

Chrysler's financing arm, Chrysler Financial, has tightened lending terms for buyers and earlier this year, it announced it would no longer offer leases.

Chrysler said the decision to add more down time was largely based upon reports from its dealers that they have many willing buyers, but that they are unable to close deals because of a lack of financing.

“People have to get credit to purchase vehicles,” Chrysler spokesperson Shawn Morgan said. “We have dealers telling us that they have customers who want to buy, but they can’t get financing. When they can get credit. Sales will improve... [but] we shouldn’t be producing vehicles without orders.”

Chrysler dealers report a loss of about 20% to 25% of their volume because of the credit situation.

~ ~ ~

plez sez: is this the harbinger of the Big Two?!?

no less than one week ago in this space, plezWorld predicted the demise of one of the big three us automakers. in light of the recession and continued credit crunch, will chrysler open any of its plants in january? in february? in march?

i find no joy in the news. this slowdown will undoubtedly affect over 100,000 workers (automakers, dealers, and suppliers) over the next month. i grew up in shouting distance of a large GM plant in north tarrytown, new york, so i know what an economic engine an automaker has in the community where it operates.

i'm afraid any bailout at this point will do little to keep chrysler afloat. the recession is cutting deep and there is no reason to believe that in one month that the credit crunch or job loss numbers will be better to allow people to once again roam the glistening dealerships of chrysler autos. seven or eight billion dollars will allow them to make payroll, make insurance payments, bolster the pension, purchase raw materials, and make more autos that NO ONE will be able to purchase in february or march.

with those facts in mind, i can foresee chrysler continually pushing back the factory startup date until they finally have to admit to themselves and the public that those plants will remain idle... and chrysler will be a us automaker no more.

this has to be worst news about the us economy since the word of the wall street collapse in september. on monday, we will talk of chrysler in the past tense. and our nomenclature will change, as we now have the Big Two.

~ ~ Citations ~ ~

Read the Detroit Free Press article about Chrysler monthlong shutdown.

Read the CNNMoney.com article about Chrysler factory shutdown.

Read the New York Times article about monthlong furlough for Chrysler workers.

Read the Washington Post article about Chrysler shutdown.

~ ~ ~ ~ ~ ~