Chrysler Shutdown Reflects Auto Industry Doldrums
DETROIT — Chrysler Corp.’s rare shutdown of every U.S. auto assembly plant for all of last week shows the bleak state of the auto industry, and analysts said Monday that it may get worse.
“There are some severe capacity problems right now,” said analyst Harley Shaiken, labor professor at the University of California, San Diego. “I think we will clearly see more shutdowns.”
Chrysler produced only trucks and minivans last week, the first time analysts could remember a car maker stopping production of cars because showrooms are overstocked.
This week, Chrysler is operating four U.S. assembly plants, two for trucks and minivans and two for cars, said spokesman Alan Miller. He was uncertain if the corporation planned another complete work stoppage of its U.S. car assembly plants.
Chrysler’s Canadian assembly plant in Bramalea near Toronto remained open last week, producing the Eagle Premier and the Dodge Monaco, said spokesman Walt McCall in Canada.
Analysts say a recession in the overall economy is causing a depression in the auto industry. They also said dwindling consumer confidence and economic uncertainty because of the Gulf War have contributed to the gloomy market.
“A number of things are coming together all at once,” Shaiken said Monday. “The auto industry is clearly in a depression. This shutdown is a particularly dramatic statement of how deep the troubles in the industry are.”
Chrysler, Ford Motor Co. and General Motors Corp. all have been struggling with slow sales. Ford and GM reported fourth-quarter losses last week, while Chrysler barely eked out a profit. All of the Big Three have initiated multimillion-dollar cost-cutting programs.
Domestic car and truck sales are running about 26.5% behind last year’s pace, which was slow itself, officials said. Chrysler sales were estimated to be running 32.8% behind last year.
The trade journal Ward’s Automotive Reports said auto makers had 91 days’ worth of new cars on hand as of Jan. 31, compared to 74 days’ worth the month before.
“It’s a fairly severe readjustment to shut down for a week,” Shaiken said. “It throws the whole supplier system out of whack and creates a lot of problems. But the alternative is pumping cars into the parking lots.”
Shaiken said he expects temporary shutdowns to continue until the war or recession ends.
The closings undoubtedly will hurt Chrysler’s earnings, Carol Verschell, an analyst at Moody’s Investor Services Inc., said Monday.
“It doesn’t look good,” Verschell said. “It’s a severe environment. They have to control the inventories now or do it later.”
Bruce Van Houten, general manager of Highland Chrysler Plymouth, a dealership in Grand Rapids, Mich., said he paid little attention to the corporation’s actions because he had enough cars to sell. “It’s business as usual for us.”
At Ford, spokesman Joel Pitcoff said the No. 2 auto maker had no plans for a similar shutdown.
“It’s a difficult time to operate plants for everybody, but I can’t imagine such a situation developing for us,” he said. “The dealers are giving us enough orders to support production across the board.”
GM spokesman John Maciarz said the No. 1 auto maker planned occasional plant shutdowns, but none across the board.
