Daily Auto News Auto Industry Falls Silent with Widespread Plant Shutdowns
Daily Auto News
The factories of the North American auto industry have fallen virtually silent.
Forbes reports, “Despite the Obama administration’s effort to manage a quick and smooth bankruptcy process for Chrysler, Detroit’s worst nightmare is already coming true.” Chrysler has announced a plan to shutter most of its factories while the company goes through the bankruptcy process. General Motors, meanwhile, has begun a nine-week shutdown of most of its facilities to allow dealers to sell off a backlog of inventory.
Even outside Detroit, many auto factories sit idle. Reuters reports, “Mexico began shutting down parts of its economy on Thursday to slow the spread of swine flu that has killed up to 176 people in Mexico. The government late on Wednesday urged all non-essential businesses to close between Friday May 1 and Monday May 5.” Many automakers build vehicles in Mexico for sale on the U.S. market.
The combination of factory closures, Forbes writes, “could jeopardize the entire North American auto industry.”
The Chicago Tribune adds, “Chrysler’s Chapter 11 filing comes at an already tough time for auto suppliers, many of whom are struggling to stay in business as automakers continually curtail production.” Analysts “have speculated that the loss of business through production cuts or payments delayed as a result of the court oversight could force suppliers that are heavily dependent on Chrysler to shut down their own production or even close up shop. This in turn could cause supply shortages at other automakers, both domestic and foreign, and make them curtail production as well.”
“The domino effect,” Forbes writes, “will be substantial. The cuts don’t just hurt GM and Chrysler, but potentially Ford, Toyota, Honda, Hyundai and others. Automakers that are not surviving on federal loans have been subsidizing their ailing suppliers for months in an effort to keep parts flowing to their factories.” While Ford has not applied for any federal funding, Detroit’s healthiest automaker has repeatedly said that it fears a bankruptcy by one or more of its rivals could disrupt its own supply chain.
CNN Money notes, “The Obama administrationsays it expects a quickbankruptcy and a tie-up with Italian carmaker Fiat with little interruption to Chrysler’s day-to-day operations. If that happens, analysts predict there may be little need for permanent mass plant closings.”
Until resolution is clearer, however, many are worried. The AP reports, “Fears are running high that a Chrysler LLC bankruptcy could devastate southeast Michigan. It also could leave Chrysler workers and retirees with fewer benefits and create an even bigger sea of red ink for state government.”
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