55,000 GM workers brace for 9-week idle

By TIM HIGGINS

Plants that make better-selling models will face shorter shutdowns, one source said.

DETROIT — As General Motors increasingly faces the possibility of bankruptcy, the Detroit automaker is making plans to shut down most of its U.S. factories for up to nine weeks this summer and to not make a $1 billion debt payment due June 1.

The plant closures would begin next month, the Detroit Free Press was told, and they would temporarily reduce the pay for as many as 55,000 autoworkers nationwide.

The move would save GM, which is operating with a $13.4 billion federal loan, money and help reduce swelling inventories of unsold cars and trucks.

Ray Young, the company’s chief financial officer, said GM is also rushing to launch an effort to get its debt holders to voluntarily exchange the $28 billion they are owed in exchange for a stake in the company. But whether that effort is successful or not, GM does not plan to pay what it owes come June 1.

“We’re not going to make that payment,” Young said, speaking to reporters after a Detroit Chinese Business Association conference in Dearborn, Mich. “That’s part of the reason why we’re going to get this thing done one way or another ... That’s the deadline.”

The revelations show just how close GM is to bankruptcy if a deal can’t be reached to reduce its debt and aggressively restructure its business.

General Motors’ massive summer shutdown is expected to begin at some plants in mid-May, the Detroit Free Press was told Wednesday.

Most of its factories will be closed for up to nine weeks, a person familiar with the planning said.

Another person said a few plants that make more popular models could remain open for part of the shutdown period, but at reduced assembly line speeds.

Dave Green, president of UAW Local 1714 at the Lordstown fabricating plant, couldn’t be reached Wednesday night.

Thomas Pyden, a GM spokesman, declined comment on Wednesday, saying that “if and when we have production news, our intent is to share it with employees first, and we have had no such announcements.”

A person familiar with the planning said an announcement was slated for Friday.

Workers at GM’s Orion Assembly plant, which makes Pontiac G6 and Chevy Malibu cars, were told that the factory would be idled in May and for half of June. But they have not heard about what to expect after the typical two-week summer shutdown, which starts in July.

Elbert Havard IV, who attaches doors to sedans at the Orion plant, said he understands why the automaker would decide to extend the shutdown.

“If we’re making cars nobody is buying, then I think that’s more negative for the company than for us,” said Havard, 31 of Flint, Mich. “I hate to not work. But it makes sense why they would have to do that.”

Over the past year, GM has turned to extended and rolling shutdowns at various facilities as it has worked to shed excess inventory and cut expenses.

The company’s U.S. sales have dropped 48.8 percent so far this year compared to 2008. The industry, meanwhile, has seen sales drop off by a lesser 38.4 percent.

The Detroit automaker, which lost about $70 billion over the past two years, is racing to come up with a more aggressive turnaround plan before June 1 that impresses the White House after failing to prove that its previous plan could make the company viable long-term.

GM is staying afloat on a $13.4 billion loan and needs about $5 billion more by the end of the second quarter. In all, GM has asked for as much as $30 billion in support.

Industry analysts were surprised at the news today, saying it could further reduce incoming revenues.

“That’s the red blood of the whole system, production. They get paid when they ship them out the back door of the plant,” Joseph S. Phillippi, an industry consultant from AutoTrends Consulting, said.

Phillippi said GM’s move was likely to reduce dealer inventories and could be a way to conserve cash before a bankruptcy filing.

At the end of March, GM reported that it had about 765,000 vehicles in stock — down about 108,000 vehicles, or 12 percent, from a year before.

While the shutdowns will affect some plants at different times, the Detroit Free Press was told, a lot of the plants will be down at the same time.

The shutdown will include the typical two-week summer shutdown used to change over for the new model year.

UAW workers affected by the shutdown will be placed on temporary layoff, where they receive state unemployment benefits and company supplemental pay that roughly equals about 70 percent of their gross pay.

GM has 47 U.S. manufacturing facilities and employs about 55,000 UAW workers.

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,” said Don Libby, an independent analyst of the automotive industry said.

The Associated Press contributed to this report.