Chrysler has announced that on Friday, all of its plants will close for at least one month. Chrysler cites the credit crisis as the major reason behind this closure, stating that financing is unavailable for both customers and dealers. The company has 30 plants in the United States, Canada and Mexico that will all be closed for at least 30 days.
This news should come as no surprise. Chrysler has repeatedly warned that without government assistance it would not have the capital to continue operations through the end of 2008. These cuts will help Chrysler stay out of bankruptcy for the time being, but unless credit becomes available and sales improve, the company will need help from the government.
At the end of the month-long production stop, President-Elect Obama and the new Congress will have been sworn in. An auto-industry bailout will be much more likely when Congress is in a full session. The recent attempt to secure money for the Big Three failed in the Senate when supporters couldn’t gather the 60 votes out of 200 needed to pass the bill.
The plan to stop production in order to save money makes sense, according to Joe Phillippi of AutoTrends Consulting Inc.
"If you’re not building cars for a month, you don’t have new bills to pay," Phillipi explained to The Detroit News. "Chrysler can say OK because we’re not building cars for a month. It’s a way to stem the outflow of cash Chrysler doesn’t have."
Picture by Getty Images via bbc.co.uk