Chrysler Halts Production, GM Expands Shutdowns

(MoneyWatch)  Largely lost in the noise surrounding Chrysler filing for bankruptcy on April 30 is the fact that both Chrysler and General Motors are curtailing production, a move that would make a very loud splash in normal times.

At the same time Chrysler filed for Chapter 11 protection from creditors, Chrysler announced it will temporarily stop all manufacturing operations effective May 4. The company said its factories will remain idle as long as it is in U.S. Bankruptcy Court.

Both Chrysler and Obama Administration officials said they expect Chrysler to emerge from bankruptcy in 30 to 60 days, but there's a risk it could take longer. Even a 60-day hiatus is a long time to stop the factories, in an industry with high fixed costs and low margins.

Chrysler Chairman and CEO Bob Nardelli said in an e-mail to employees on April 30 that during the shutdown, hourly employees will receive unemployment benefits, as well as supplemental pay that will amount to most of their base wages.

Nardelli also confirmed reports that he will step down after Chrysler restructures itself.

Meanwhile, GM announced on April 23 that it will take about 190,000 cars and trucks out of already reduced second- and third-quarter production schedules, to get bloated dealer inventories in line with low demand.

On top of previously scheduled summer shutdowns, GM is adding down-time at 13 North American assembly plants, in staggered steps from early May though the week of July 19. The cuts include both cars and trucks.

GM reported that at the end of March, it had about 767,000 vehicles in U.S. dealer stock. That was down about 108,000 vehicles or 12 percent versus the same period last year, but sales are down much more sharply. GM has a new inventory target of about 525,000 vehicles by the end of July.

Photo: GM