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Apr 23, 2009 5:47 pm US/Central
Arlington GM Plant To Close For Nine Weeks
GM North America President Said Decision Was "Difficult But Necessary"
ARLINGTON (CBS 11 News/AP) ―
General Motors workers in Arlington learned today that the plant will be shut down for more than two months this summer. During a
telephone conference call Thursday afternoon GM North America President Troy Clarke said the extended shutdowns were "difficult, but necessary".
The Arlington GM plant will be shut down from May 11th until July 13th. In all, 13 North American plants will experience extended shutdowns.
The GM assembly plants that will see additional down weeks are in Arlington; Bowling Green, Ky.; Detroit-Hamtramck, Mich.; Flint, Mich.; Fort Wayne, Ind.; Lansing, Mich.; Lordstown, Ohio; Pontiac, Mich.; Shreveport, La.; Spring Hill, Tenn.; Wilmington, Del.; Wentzville, Mo.; and Silao, Mexico.
Traditionally, the Arlington GM plant shuts down for the first two weeks in July, so this year's change means workers will be off for an additional
seven weeks. Each year GM used the two-week July shutdown to make changes from one model year to the next.
Arlington assembly plant workers told CBS 11 News that the announcement means they will have to struggle longer with reduced incomes and fear over the company's future. "We got family and we got to make our bills," said Arlington GM worker Clifton Rozier. "If we can't bring the money the lights can't stay on."
During the conference call Clarke said the extended shutdowns will help GM be prepared for future growth. Clarke said one of the goals is to reduce the current number of inventory units from some 767,000 to 525,000 and, from a "positioning strategy", to put the company in a better place for the production and sales of 2010 model year vehicles.
Clarke said the extended shutdowns, and hopes of reducing current vehicle inventory, is no indication that the company is leaning more toward filing for bankruptcy.
The move to close plants for a longer period this summer is a result of slumping sales and growing inventories of unsold vehicles, but some analysts and dealers fear the extended plant closings could further scare car buyers already made nervous by talk of a GM bankruptcy.
Clarke would not talk about the possibility of GM plants being shut down completely in the future. During the peak of the extended shutdown, there will be a 40-percent cut in the production of GM vehicles.
At certain times in the past when GM had shut down some of its plants, the impact on the Arlington facility was less than at other factories, because workers there produce the very popular Cadillac Escalade.
During the extended shutdown United Auto Workers employees at the Arlington plant will be eligible for state unemployment assistance and UAW supplemental benefits. The supplement is a part of the UAW union contract, which requires GM to make up much of the difference between state unemployment benefits and employee wages.
"That [the UAW supplement] will probably get us to about 80-percent of what we're bringing in," explained J.R. Flores with UAW Local 276. "But that's a 20-percent cut in pay of what you're bringing in. But your mortgage is still a hundred percent due, your car payments... still gotta put food on the table and put your kids through school."
The extended plant closings will be staggered between mid-May and the end of July.
But the shutdown could be catastrophic to many auto parts suppliers that already are near bankruptcy due to previous production cuts. During the shutdown, suppliers couldn't ship parts to GM and would lose critical revenue.
Workers at Arlington companies, like Lear - who makes car seats for GM, will also be impacted. Local suppliers declined comment to CBS 11 News but did say if GM makes cuts, they will have to make cuts too. Suppliers didn't elaborate on how many hundreds of jobs would be affected.
In a press release issued by GM Thursday the company said with the implementation of the extended shutdown plan "approximately 190,000 vehicles will be removed from GM's North American production schedule in the second and early third quarter of this year".
GM is living on $13.4 billion in government loans and faces a June 1 deadline to cut its debt, reduce labor costs and take other restructuring steps. If it doesn't meet the deadline, the company's CEO has said it will enter Chapter 11 bankruptcy protection.
The billions of debt could mean Arlington workers, who've give their careers to GM, may not see the retirement they've worked toward for decades. "Its hard to think that after almost 30 years, of working for them [GM], you may not go home with what you signed on to get when you started out," said retiring Arlington plant worker Steve Bates. "But the fact of the matter is, that's the ballgame. With the economy turning down and everything, you just don't know."
The Treasury Department declined to comment on any effect the plant shutdowns might have on GM's restructuring plans.
Separately Wednesday, GM announced that it may miss a $1 Billion bond payment also due June 1 if its debt-for-equity exchange is still in progress by then. GM also could go into bankruptcy protection, which could make the company miss the payment as well.
The company plans to make the exchange offer soon to bondholders, perhaps as early as next week. GM has $28 billion in unsecured bond debt and is under government pressure to reduce that to solidify its balance sheet.
GM's sales were down 49 percent in the first quarter compared with the same period last year, and GM had a 123-day supply of cars and trucks at the end of March, according to Ward's AutoInfoBank. That's down from 162 days worth in January.
But as of March 31, the automaker had a more than six-month supply of several models including the Pontiac G5 compact and Chevrolet Silverado hybrid pickup truck. The lengthy shutdown likely means that GM doesn't see its sales rebounding anytime soon, said Tom Libby, an independent Detroit-area auto industry analyst.
"They must be forecasting a sales level that is low enough between now and the summer that they see their inventories building," he said late Wednesday. "It's sort of an ominous comment on what they see for the industry."
GM CEO Fritz Henderson has said the company would prefer to restructure outside of court, but it is preparing for a prearranged bankruptcy as well as one in which good assets would be separated from underperforming ones.
"Just using the word bankruptcy, their (market) share is down a lot just because of this talk," Libby said. "They may be counting on a further decline."
The plant closures add to the onslaught of bad news coming out of GM, said John Clark, president of Avenue Chevrolet, a dealership in Batavia, Ill., near Chicago.
"Henderson making statements about bankruptcy sure doesn't help his cause, and all of the sudden we have this," he said. "I've been getting calls from customers about warranties. I can't see this as a positive move."
The government has said it would guarantee GM and Chrysler warranties as the companies restructure.
Libby did say GM should be applauded for not building too many vehicles and then having to spend big on rebates and other incentives to move them, something the
Detroit Three have been guilty of in the past.
Other GM dealers said a shutdown of up to nine weeks is jarring, but not unexpected given the sales slump.
"Nine weeks seems like an awful long time, but the way business is, not an awful lot of cars are being sold anyway," said George Tasker, fleet manager at Martin Chevrolet in Torrance, Calif.
Tasker said the move wouldn't affect business, as dealers would "get together and trade more easily" to find the exact car a customer wanted.
Nearly all automakers with U.S. factories have closed plants or cut production to deal with the auto sales slump. Earlier this year, GM temporarily closed 20 factories across North America due to weak sales, some for the entire month of January. Chrysler LLC, also subsisting on government loans, closed all 30 of its manufacturing plants for a month in January to counter the auto sales downturn.
Ford Motor Co. also shut down 10 North American assembly plants for an extra week in January, and both Toyota Motor Corp. and Honda Motor Co. have cut production.
(© 2009 CBS Broadcasting Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.)
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