GM plant to close by year's end
A glimmer of hope remains, however, that a local proposal to lure some new GM product to Janesville will succeed.
A spokesman in Sen. Herb Kohl’s office said a representative of GM told the senator on Friday that GM plans to end SUV production by the end of this year.
Kohl issued a news release Friday afternoon, suggesting that the final decision had been made. News reporters responded to the release, asking questions that led to the statement by his spokesman. Statements from other politicians followed.
“This is a dark day for Janesville and a dark time for America as the economy struggles,” Kohl said in the news release. “General Motors’ plant has been a central part of the community for generations, and its closing will have devastating consequences.”
Rep. Paul Ryan also issued a statement: “This is obviously disappointing news … I’m encouraged that GM is willing to continue a dialogue with state, local and union leaders, who have offered a comprehensive incentives package to GM to bring another product to the plant.
“It is also critical to note that this news applies to the current product at the plant, not the future of the plant itself,” Ryan’s statement said. “Local leaders have worked tirelessly to secure the best deal possible for Janesville workers, and I will continue to advocate on their behalf.”
Gov. Jim Doyle also reacted: “We are still hopeful that in the midst of the current financial crisis, we can convince General Motors that Janesville is ideally suited for a new product line. I have received assurances from General Motors that any announcement is not a response to the incentive package we delivered to them last month and that they will continue to consider our package.”
Rep. Tammy Baldwin said she had been briefed on a GM announcement that was expected on Monday.
“While I cannot comment on the specifics prior to Monday, I can say that this announcement of a specific date on which production on the current lines of vehicles will cease is a setback for the Janesville GM workers, their families and the entire Rock County community.” Baldwin said.
And from Sen. Russ Feingold: “I know GM was impressed with the work of the Janesville GM Retention Task Force in crafting the package and is currently reviewing the Janesville proposal. I will continue to do all I can to help the people of Janesville through this difficult transition.”
GM spokesman Chris Lee would not confirm that SUV production will end here in December.
“We have nothing to announce at this point in time. When we do, we will tell our employees first, after which we will share that information with the rest of the world,” Lee said.
General Motors announced in June that it planned to end production in Janesville by the end of 2010 at the latest, depending on market conditions. The reasons were a weak U.S. economy and consumers who shifting their preference from trucks to fuel-efficient cars.
A person with knowledge of the company’s plans said Friday that GM is likely to announce further production cuts and speed up its planned closing of plants—including the one in Janesville—as early as next week.
The person, who did not want to be identified because the plans are not finalized, said the cuts likely will hit engine, transmission and stamping operations to correspond with a June announcement that GM would close four truck and sport utility vehicle assembly plants.
The closure dates for those plants likely will be accelerated, the person said. GM announced last week that its Moraine, Ohio, SUV factory will close Dec. 23, and it has said it will idle assembly factories in Oshawa, Ontario; Toluca, Mexico; and Janesville by 2010.
About 1,150 hourly workers at the Janesville plant build Chevrolet Suburbans and Tahoes and GMC Yukon XLs and Yukons.
Rumors have circulated that GM officials will visit Janesville next week and deliver the news that SUV production will end here in December.
For that to happen, GM would have to notify the state 60 days before it ceases production.
Chairman and CEO Rick Wagoner said last month that GM would have to make adjustments, particularly in stamping factories.
Slumping sales and a collapse in its stock price have battered GM.
Further cuts could shore up GM’s share price, which lost nearly half its value this week, plunging to the lowest level in more than 58 years. The shares fell 31 percent to $4.76 Thursday and dropped to $4 in the first minutes of trading Friday before rebounding to $4.99 by midday.
Industry analysts say closing factories or pulling off shifts will help GM cut costs and preserve cash at a critical time with the company losing billions and burning up cash at an alarming rate.
GM had $21 billion in cash and $5 billion available through credit lines at the end of June for total liquidity of $26 billion but has been burning up cash at a pace of more than $1 billion a month.
The company announced a plan in July that calls for cutting $10 billion in costs and raising another $5 billion through asset sales and borrowing through 2009.
Auto analyst Mark Warnsman of Calyon Securities said further production cuts are consistent with what GM and other automakers have been doing all year—cutting factory capacity to match lower sales.
“I think it’s a positive sign that GM is biting the bullet,” he said. “For GM going forward, they’re going to have to use everything available to them.”
The drop in GM’s share price Thursday was fueled by a statement from Standard & Poor’s Ratings Services, which said the “rapidly weakening state” of the global automotive market could push GM’s credit further into junk status, making it even tougher to borrow money.