General Motors routinely closes for two weeks in July each year. This year will bring with it extended closings, ranging anywhere from one extra week to nine additional weeks, depending on the assembly plant.
GM announced Thursday that this summer 13 plants are set to temporarily shut down in the U.S. and Mexico, affecting around 24,000 workers, according to the Associated Press. The shutdown, which will enable GM to cut their production output by 190,000 vehicles, will occur as GM attempts to allow its dealers to sell down overstuffed inventories.
Although GM’s inventory is only 12 percent less than it was last year (currently at 767,000 vehicles in U.S. dealer stock), its sales have decreased by close to 50 percent since then.
In a company statement, GM North America President Troy Clarke explained: “While sales have been performing at or close to our plan estimates, and dealer inventories have been reduced accordingly, we want to more closely align inventories with even more conservative market assumptions.”
GM also said that it has been working with auto parts supplier Delphi, to ensure that Delphi’s bankruptcy case does not result in a stalled supply of parts. Although GM offered solutions to Delphi which would “ensure GM’s source of supply under fair and reasonable term,” Delphi and its lenders have declined these terms. Therefore, the shutdown will also give GM time to plan for any problems that may arise from the Delphi case.
The Associated Press offered a statement from GM, explaining the possible consequences of the case; “Without successful resolution of this dispute, it is General Motors’ view that Delphi or its lenders could force GM into an uncontrolled shutdown with severe negative consequences for the U.S. automotive industry.”
Plants will be closed in Texas, Kentucky, Michigan, Indiana, Ohio, Louisiana, Tennessee, Delaware, Missouri and Mexico. The longest shutdown will occur for 11 weeks in Fort Wayne, Indiana and affect approximately 2,600 workers.
The Associated Press also reported that laid-off hourly workers will be given unemployment benefits along with supplemental pay from GM, which will supply a total around most of their base wages. According to Clarke, salaried workers will also receive a certain amount of income.
The shutdowns will not result in a complete lack of production; certain GM plants will remain active, such as Michigan’s Lansing Delta Township plant, which will carry on with operations during the two-week shutdown.
Hosting a total of $13.4 billion in government loans, GM must undergo a difficult restructuring process by June 1, or the company will enter Chapter 11 bankruptcy protection, according to its CEO.
quote: What is relevant is that their cost structure is as elastic as their revenue.