Chrysler shuts down all production
Close of business Friday will be the start of a month-long closure of 30 U.S. plants. Company cites 'continued lack of consumer credit.'
By Peter Valdes-Dapena, CNNMoney.com senior writer
Last Updated: December 17, 2008: 6:28 PM ET
NEW YORK (CNNMoney.com) -- Chrysler LLC announced late Wednesday that it is stopping all vehicle production in the United States for at least a month.
All 30 of the carmaker's plants will close after the last shift on Friday, and employees will not be asked to return to work before Jan. 19.
Chrysler blamed the "continued lack of consumer credit for the American car buyer" for the slow-down in sales that forced the move.
Chrysler ordinarily shuts down operations between Dec. 24 and Jan. 5 for the holidays. This closure would add roughly two weeks to that shut-down.
Chrysler would not say how many fewer vehicles would be produced because of this shut-down. A total of 46,000 employees will be affected. They 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, a Chrysler spokesman said.
"Chrysler dealers confirmed to the company at a recent meeting at its headquarters, that they have many willing buyers for Chrysler, Jeep and Dodge vehicles but are unable to close the deals, due to lack of financing," the carmaker said in an announcement. "The dealers have stated that they have lost an estimated 20% to 25% of their volume because of this credit situation."
Auto sales have been hit hard 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 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, Ford Motor Co. (F, Fortune 500) and General Motors (GM, Fortune 500) have approached Congress for aid to help them get through the current financial crisis. A congressional effort to establish a stopgap, $14 billion loan program to help Chrysler and General Motors at least until next month collapsed in Congress last week.
The Bush administration has said it is working on a plan to throw the companies a lifeline possibly using money from the $700 billion bailout approved by Congress in October, the Troubled Asset Relief Program or TARP.
General Motors recently announced it was idling 30% of its North American manufacturing capacity during the first quarter of 2009 in response to deteriorating market conditions.
"The speed and severity of the U.S. auto market's decline has been unprecedented in recent weeks as consumers reel from the collapse of the financial markets and the resulting lack of credit for vehicle financing," Genetically-Modified said in a Dec. 12 announcement, citing a 41% drop in November sales.
Both GMAC and Chrysler Financial have been trying reorganize so they can be classified as banks and receive federal assistance under the TARP program. GMAC is affiliated with General Motors, which owns 49% of the finance company. The other 51% of GMAC is owned by a consortium of investors led by Cerberus, which owns Chrysler and Chrysler Financial. To top of page
First Published: December 17, 2008: 5:59 PM ET