Chrysler to idle plants, pressure builds for aid
DETROIT/WASHINGTON (Reuters) - Chrysler LLC said on Wednesday that it would halt factory operations for at least a month, putting new pressure on the Bush administration to quickly help cash-strapped automakers.
The shutdown beginning on Friday will idle plants in the United States, Canada and Mexico that produce vehicles for its Chrysler, Jeep and Dodge brands.
More than 30,000 unionized workers at U.S. factories will receive nearly full wages and benefits during the shutdown, which Chrysler said was prompted by ongoing financial stress worsened by the global credit crunch and dwindling sales.
Chrysler sales plunged 47 percent in November and were down almost 28 percent for the first 11 months of 2008.
The dramatic and unexpected move to save money underscored the urgency of pleas by Chrysler and General Motors Corp for an immediate bailout they say is their best hope for near-term survival.
GM has said it would cut first-quarter production by 60 percent compared with the same period a year earlier. And on Wednesday, the company said it had suspended construction at an engine plant in Michigan central to its long-term plans to build more fuel-efficient vehicles.
The White House had no comment on the Chrysler development but leading Senate Democrats who have pressed for assistance said the decision to stop work even temporarily demonstrated that intervention cannot wait any longer.
"This administration must act now," Sen. Debbie Stabenow, a Michigan Democrat, said in a statement. "I once again call upon the president to use his authority and provide a bridge-loan to our automakers."
Democratic lawmakers and industry sources have said that any emergency assistance would likely cover GM and privately held Chrysler and total up to $14 billion.
Ford Motor Co, the healthiest of the three, is not seeking immediate capital but has asked the government for a line of credit to be tapped only if its finances worsen more than expected in 2009.
DECISION NEEDED "SOON"
GM shares closed up more than 2 percent to $4.37 on bailout hopes, while Ford shares closed up less than 1 percent to $3.14. Both trade on the New York Stock Exchange.
President George W. Bush told FOX News Channel's "Special Report" that a decision on the bailout needed to happen "relatively soon" and all options were being considered.
The aid was expected to come from a $700 billion fund established in October to rescue distressed banks and other financial institutions.
A source familiar with the Treasury Department's thinking on the matter said the agency might instead issue bonds to finance bridge loans.
Lawmakers had not expected a decision before midweek and industry and other sources believe an announcement could now be made on Friday.
A spokesman for House Speaker Nancy Pelosi said in response to the Chrysler decision that it was critical for the White House to act swiftly with conditional assistance to prevent "imminent insolvency" of the industry.
Ford, Chrysler and GM fear failure by one or more of them would drag down the others because of their shared supplier networks.
A spokeswoman for Sherrod Brown, a member of the Senate Banking Committee, said the Ohio Democrat had spoken to a senior Treasury Department official earlier in the day to urge quick action by the administration.
"Tonight's announcement (on Chrysler) only underscores the dangers of waiting to act," said Joanna Kuebler, a spokeswoman for Brown.
Congressional Democrats continued to push for aid conditions that would mirror those in a bill they negotiated with the White House last week that passed the House. The bailout effort stalled in the Senate, prompting the administration to step in.
Conditions would require equity in return for aid, limits on corporate compensation and the appointment of a trustee or "car czar" to oversee the bailout and review restructuring efforts.
Some Republicans want the White House to require tougher conditions by giving the "car czar" power to push the companies into bankruptcy, if necessary.
Moody's Investors Service said on Tuesday a prepackaged bankruptcy -- when concessions and restructuring terms are negotiated ahead of any court filing -- was a likely industry scenario.
Bush said in his television interview that any disorderly failure would "cause a great deal of harm to the economy."