Company plans for slow summer
As General Motors faces the possibility of bankruptcy, the company says there may be a nine-week GM shutdown starting as soon as next month.
The automaker might close down several plants for nine weeks. An overabundance of inventory plus typically slow summer sales are causing GM to consider ceasing production for a couple of months.
Not very hush hush
Sources who have talked to newspapers regarding the imminent GM shutdown has asked to remain anonymous because GM workers haven’t been told about the shutdown yet.
Thousands of workers will be laid off if the GM shutdown goes through. however, the employees won’t miss out on much pay. The United Auto Workers union is required to make up most of the difference in salary between GM paychecks and unemployment insurance. So for the nine weeks that production is halted GM workers should be able to get by without payday loans or credit cards.
Summer slowdown
Usually GM shuts down most of its plants for about two weeks during the summer. Plants stop operating in between switching over to building new models. The GM shutdown this year would occur around the same time, it would just be longer.
Outside GM
GM is hoping that an extended shutdown will help reduce the growing stockpile of vehicles it has at the moment. However, auto parts makers could stand to lose a lot of critical revenue if the country’s largest automaker ceases production for nine weeks.
“It’s one of those things we’ve been dreading for a long time,” said Jim Gillette, director of financial services at auto-industry consultant CSM Worldwide in Grand Rapids. “It’s as bad as its ever been.”
Deadlines and debt
GM has taken out $13.4 billion in government loans so far. Furthermore, it owes a $1 billion payment to go toward its $28 billion debt, due by June 1. The company has said it’s not sure it will be able to make that payment.
Self-fulfilling prophecy
Along with the news of the upcoming $1 billion due, rumors began flying about the company possibly filing for bankruptcy. One analyst believes the low sales that causing rumors of the GM shutdown are partially caused by the bankruptcy rumors.
Tom Libby, an independent Detroit-area auto industry analyst, says he thinks the company’s sales are declining because customers are concerned that GM will file for bankruptcy. He also views the possibility of a shutdown as a bad sign.
“They must be forecasting a sales level that is low enough between now and the summer that they see their inventories building,” he said. “It’s sort of an ominous comment on what they see for the industry.”
Avoiding bankruptcy
GM CEO Fritz Henderson recognizes that the company must undergo a financial restructuring, but says he would prefer to do it out of court. Nevertheless, the company has already prearranged a bankruptcy.
The government has said it will guarantee GM and Chrysler warranties during any restructuring.
Wow. A 9 week shutdown…this is bad. If this can help them to make that $1 billion payment, then I’d say go ahead, but if it’s just a stall…they should go ahead and file for bankruptcy. Obviously, I think everyone would prefer that they don’t, and so do I, but I don’t know if they can. Let’s hope so – I’d hate to see the Corvette become a thing of the past.