DETROIT (April 23, 2009) — Amid the worst sales slump in 30 years and cascading financial problems, General Motors Corp. announced today that it will cut 190,000 vehicles from its production schedule for the second and third quarters.
In a statement this afternoon, GM said the cuts, which will close some plants for eight weeks, will trim high dealership inventories and put production in line with sluggish sales.
It also said the cuts could help prevent a GM shutdown in case Delphi, GM's troubled former parts unit, could not deliver parts because of its own financial problems.
"We're taking aggressive steps to accelerate our inventory initiatives that have worked well since the first of the year," said Troy Clarke, GM North America president.
"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 our inventories with even more conservative market assumptions," Clarke said in the statement.
In a conference call with reporters, Clarke said GM had planned to gradually reduce vehicle inventories at the start of 2009. But GM CEO Fritz Henderson decided to accelerate the inventory reduction with the plant closings to help GM meet the goals in its viability plan.
"We really need to get inventory in line much quicker," he said. The production cuts are part of Henderson's plan to move faster and deeper, Clarke said.
GM consulted with President Obama's Automotive Task Force, but was not given orders to shut the plants, Clarke said.
"It was an internal decision, part of reinventing GM, part of the viability plan. We certainly advised the task force of our actions so that they are familiar with what we are trying to get done," he said.
To achieve the production cuts, GM will idle 13 North American plants in the second and third quarters. But plants that assemble new or redesigned vehicles that are now launching will not be affected. Those include the Chevrolet Camaro, Buick LaCrosse, Chevrolet Equinox and Cadillac SRX.
GM said it had 767,000 vehicles in inventory at the end of March, down 108,000, or 12 percent, from last year. April sales are not likely to improve over last month. J.D. Power and Associates said retail sales during the first half of April fell 33 percent over the same period of last year.
Clarke told reporters that the company hopes to cut its inventory to 525,000 units by July. He said the plant closings would range from one week to eight weeks.
GM also said the festering financial situation at Delphi Corp. could jeopardize parts deliveries in the coming months.
GM said negotiations with Delphi and its lenders so far have failed to reach an agreement that would ensure GM parts deliveries.
"Without the 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," GM's statement said.
George McGregor, vice president of UAW Local 22 at the Detroit-Hamtramck assembly plant, said workers weren't surprised by today's news, given that dealers aren't buying cars in this slow economy. The plant builds the Buick Lucerne and Cadillac DTS sedans.
McGregor said the plant has been building only 35 cars an hour since January. Its normal rate is 56 cars an hour.
He added: "Members knew something was coming because of the 35 jobs an hour, and we can look out the back of our plant and see most of the cars are still there."