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Big Three Shut Down Production -- Will They Come Back at All?

Posted: Dec 18, 2008 11:00 a.m.

All three of America's largest automakers yesterday announced plans to shut down factories for extended holiday breaks - and a carefully worded statement from one of them has some wondering if the plants will ever open again. Both General Motors and Chrysler, after all, have cast doubt on whether they will survive into 2009 without government assistance.

The AP reports, "Chrysler is closing all its North American manufacturing plants for at least a month, the starkest move yet taken by U.S. automakers as they anxiously await word about government loans."

Fox News adds, "Ford also announced it plans to shut down 10 of its North American assembly plants for an additional week in January instead of its normal two-week holiday stoppage."

General Motors in addition to its traditional holiday shutdown, has decided to halt construction on a critical engine plant, according to Bloomberg. "GM said yesterday that a new $370 million factory making engines for the Chevrolet Volt electric car is being delayed to conserve cash." That Flint, Michigan plant was to build an engine that would be used in what most analysts consider the company's most important future cars - the electric Chevy Volt and the Chevy Cruze economy car.

Jalopnik noted that Chrysler's statement explaining the shutdown sounds particularly ominous. The press release read, in part, "Chrysler manufacturing operations... will not return to work any sooner than Monday, Jan. 19, 2009." Jalopnik asks, "Did anyone else notice they wouldn't commit to coming back?" The other major automakers did provide dates when production is expected to continue, though GM has not said when construction of the Flint plant might resume.

Both GM and Chrysler have said they may not be able to meet expenses after December without government assistance. White House Spokeswoman Dana Perino told the AP, "It's clear that the automakers are in a very fragile financial condition and they're taking steps to deal with it. We're aware of their financial situation and are considering possible policy options to provide assistance in an appropriate way."

Forbes notes another subtle but drastic step for Chrysler. The company announced that it "will also begin assessing fees on its dealers for unsold inventory."

That last point is important for car shoppers. Car dealers already have incentives to sell cars at a loss in order to move them off of their lots after the cars have gone unsold for a certain amount of time. The dealers don't buy cars; they take out so-called "floorplan loans" on the cars they stock, and traditionally must begin making payments on the cars themselves when a car sits unsold for long enough - typically six months, but loan terms vary from dealer to dealer. Chrysler dealers will soon be paying an additional fee to the company for each car they fail to sell. If you're interested in a Chrysler, Jeep or Dodge vehicle, this may be the time to move - dealers have never been so motivated to get rid of the cars on their lots as fast as possible.

While the bailout debate goes on, automakers are trying to sell cars as fast as possible with deep discounts.  Research the best car deals available in this market.