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May 1st, 2009
04:09 PM ET

Financial Dispatch: Chrysler plants, workers face uncertain fate

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Andrew Torgan
CNN Financial News Producer

With Chrysler now in bankruptcy, what may happen to the automaker's 22 U.S. plants and thousands of workers remains largely an unanswered question.

During a conference call to discuss the bankruptcy on Thursday, government officials said Chrysler has no immediate plans to permanently lay off workers or close factories.

Chrysler did say all of its plants planned to shut down temporarily during bankruptcy starting Monday, and it did confirm that some plants were already closing as of today due to problems getting parts from suppliers.

And Chrysler this morning identified four plants with almost 5,000 jobs between them slated for closure by the end of 2010, according to a filing with the bankruptcy court. The plants on the chopping block are the Sterling Heights, Michigan assembly plant that makes the Chrysler Sebring and Dodge Avenger; the St. Louis North assembly plant that builds the Dodge Ram pickup; the Twinsburg, Ohio stamping plant and an engine plant in Kenosha, Wisconsin.

The White House expects Chrysler's trip into bankruptcy will be a quick one, and that its alliance with Italy’s Fiat will result in little interruption to Chrysler's day-to-day operations.

If that happens, analysts predict there may be little need for permanent mass plant closings.

But the Chrysler's future is far from certain. Bankruptcy could turn into a prolonged process and the company’s emergence is by no means guaranteed. So whatever happens, many analysts say at least some Chrysler plants will have to be shut down permanently.

But there’s a Sebring in my garage…

So now that Chrysler’s filed Chapter 11, what does that mean for you if you've got a Chrysler parked in your driveway?

The first thing you need to know here is that the bankruptcy filing does not mean that the carmaker is going out of business.

Chrysler will be restructuring and changing management in combining with Fiat in the weeks to come, but there’s no indication that Chrysler will be liquidating its assets or boarding up its showrooms.

Chrysler will continue to stand behind its powertrain warranties, so you can go get the repairs you qualify for, and auto-parts makers should continue to function as normal.

But as far as resale values go, you’re probably going to take a hit.

Auto sales paint a mixed picture

With one of Detroit’s Big Three already in bankruptcy and another facing its own restructuring deadline in a month, we’re getting the latest look at auto sales in the U.S. today.

General Motors says sales in April fell sharply, but its results were better than analysts' expectations.

The automaker, which is facing a June 1 deadline to restructure, says sales fell 33% last month - a big improvement from March’s 45% decline

Ford’s sales fell substantially in April, but the pace of the decline slowed from the previous month.

Ford posted a nearly 32% drop in sales from a year ago and its declines were across the board. That was a steeper decline than forecasts of a 27% drop, but better than the automaker's 41% retreat in March.

Ford’s sales fell 30% or more across all the company's brands and more than 15% across all types of vehicles. The biggest drop was a nearly 61% plunge in sales of SUVs.

One silver lining for Ford, however… it sold more vehicles in the U.S last month than Japanese juggernaut Toyota.

Chrysler, meanwhile, reported its sales fell by a much worse-than-expected 48% decline last month, compared to expectations of a 39% drop. That's also much worse than its 39% sales decline in March.

Bank “stress test” results delayed

The Federal Reserve and the Treasury Department are postponing the release of the results of their “stress tests” assessing the health of the nation’s 19 largest banks.

The results, originally scheduled for release on May 4th, will not be revealed until May 7th.

Wall Street is anxiously anticipating the results, as they are expected to show that several banks may need to boost there capital reserves.

The Obama administration unveiled plans to assess the health of the nation's largest financial institutions in late February in an effort to determine which companies may need to raise more capital

Troubled banks Citigroup and Bank of America, which have each received $45 billion in government bailout money, were subject to the tests.

Consumer sentiment jumps in April

Consumers felt more confident about the economy last month than at any time since the September failure of Lehman Brothers that pushed global banking to the brink of collapse, according to survey released this morning.

The Reuters/University of Michigan Surveys of Consumers said its final index of confidence climbed to 65.1 in April from 57.3 in March. That was the highest since September 2008 and the biggest one-month increase since October 2006.

The April reading also marked the first yearly increase since July 2007.


Filed under: 360° Radar • Andrew Torgan • auto bailout • Economy • Finance • Unemployment • Wall St.
soundoff (2 Responses)
  1. Michael C. McHugh

    Personally, I thought it was a good idea to let the workers own 55% of Chrysler and that the government was also an owner. Maybe we can keep at least some of these jobs in the US and also produce greener cars for the future. It's very late in the day, though, and we have already lost so much manufacturing that we have to do whatever is possible to save what's left.

    May 1, 2009 at 4:31 pm |
  2. Trav

    Three things made Chrysler go bankrupt.
    1) Mismanagement for over 20 years
    2) Poor quality products
    3) Greedy UAW

    To think that 2 or 3 junior bond holders "killed" Chrysler is very naive. Time to put the Obama Kool-Aid down.

    May 1, 2009 at 4:28 pm |