DETROIT - Chrysler L.L.C. said yesterday that it was closing all 30 of its manufacturing plants for a month starting tomorrow as it seeks to counter the most severe downturn in U.S. auto sales in more than two decades.
By extending the traditional two-week holiday shutdown, the struggling Auburn Hills, Mich., automaker can adjust production to slowing demand and conserve cash.
In a statement yesterday, Chrysler said tighter credit markets were keeping would-be buyers from its showrooms. It said that its dealers were unable to close sales for buyers because of a lack of financing and that they estimated 20 percent to 25 percent of their volume had been lost because of the credit situation. Sales in November slid 47.1 percent.
Other automakers reported a difficult environment. Ford Motor Co. said it would idle most of its North American assembly plants for the first week of January, while General Motors Corp. said a new factory making engines for the Chevrolet Volt electric car was being delayed to conserve cash.
Nor are foreign automakers immune: Honda Motor Co. Ltd. said yesterday that it was slashing its annual profit forecast, curtailing investment and slowing production to ride out a global slowdown. Nissan Motor Co. Ltd. added to the dismal news by saying it was reducing domestic production an additional 78,000 vehicles and cutting 500 temporary workers.
Earlier in the week, Toyota Motor Corp. shelved its plans to build the popular Prius hybrid in Mississippi. Toyota's plant under construction in Blue Springs, Miss., was scheduled to begin production in 2010.
Chrysler and larger rival GM have warned that they could run out of cash within weeks without financial aid from Washington. Chrysler has said that by Dec. 31, its cash will drop to $2.5 billion, the minimum needed to meet payroll, pay suppliers and run the company. It would have trouble paying bills after the first of the year.
Meanwhile, the White House and the Treasury are deep into negotiations with Chrysler and GM over a restructuring plan that could result in freeing up more than $14 billion in emergency loans to keep the companies afloat through the first quarter of 2009, according to industry executives and a senior administration official.
The Bush administration appears to want an agreement with the automakers before Dec. 25. It is unclear, however, when all of the particulars will be worked out, said the senior official, who spoke on the condition of anonymity because of the delicate nature of the negotiations.
In the talks, Treasury Secretary Henry M. Paulson Jr. is effectively taking on the role of "auto czar" that was envisioned in the rescue bill written by the White House and congressional Democrats and approved by the House but blocked by Senate Republicans.
Chrysler's operations will be idled at the end of the shift tomorrow. The earliest that plants will reopen is Jan. 19.
Chrysler is seeking $7 billion in government loans as it tries to survive the recession and the worst U.S. auto-sales slump in 26 years. For the first 11 months of this year, Chrysler sales are down 27.7 percent to 1.4 million vehicles from 1.9 million for the same period a year earlier.
With the U.S. slump expected to continue into January, traditionally one of the slowest sales months of the year, the company has little revenue coming in and must pay suppliers $7 billion every 45 days.
In the case of some plants, such as the Toledo Jeep plants in Ohio, operations will resume Jan. 26, but with one less shift. More than 750 workers are being cut on the second shift at the Toledo North plant, said Dan Henneman, United Auto Workers union official for Local 12.