Sources: Most GM plants face 9-week idle

April 23, 2009 at 12:00a.m.

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

DETROIT (AP) — General Motors Corp. is planning to temporarily close most of its U.S. factories for up to nine weeks this summer because of slumping sales and growing inventories of unsold vehicles, three people briefed on the plan said Wednesday.

Analysts say the company could be seeing sales decline because of talk about a potential bankruptcy.

The exact dates of the closures are not known, but the people said they will occur around the normal two-week shutdown in July when changes are made from one model year to the next. None of the people wanted to be identified because workers have not yet been told of the shutdowns.

GM spokesman Chris Lee would not comment other than to say the company notifies employees before making any production cuts public.

One of the people briefed on the plan said details are still being worked out. Some of the closings could be staggered between mid-May and the end of July, but the exact number of plants to be idled has not yet been determined.

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 for comments about the plan’s effect at Lordstown.

Thousands of workers could be laid off but would still get most of their pay because their United Auto Workers union contract requires the company to make up much of the difference between state unemployment benefits and their wages. UAW officials at several factories said they have meetings scheduled today and Friday with plant managers and GM human resource officials to discuss production changes.

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 Treasury Department declined to comment on any effect the plant shutdowns might have on GM’s restructuring plans.

The automaker’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. “It’s sort of an ominous comment on what they see for the industry.”

Libby also suggested that the company’s sales may be declining because customers are concerned about the automaker possibly filing for bankruptcy protection.

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.”

However, Libby said 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.