Even if you don’t work for one of the “big three” American automobile companies, chances are you’re following news about the future of Chrysler, Ford and GM with bated breath. After all, these companies aren’t just automakers, but also archetypes of Americana. As well, they’re responsible for the livelihoods of entire cities, where services exist to support the workers who go to the plant every day. For any one of them to go bankrupt would be frightening. For all three to be teetering on the breach is a disaster of Titanic proportions.
While there’s grim enough news on the auto loan front – this is just not the time to attempt to get more credit to buy anything – the news from each of the big three, even with today’s announcement from President Bush that there will be help (to the tune of $13.4 billion, with another $4 billion to come later), is mixed at best. Here’s an overview of how each company is doing:
Chrysler:
Chrysler will be getting $4 billion from the stopgap loan funds, it was announced today, but even with that, they’re doing their best to cut costs. One thing they’re doing is to stop all production for a month. This is because they currently have a four-month supply of unsold vehicles. By shutting down their plants for an extended holiday, they can reduce overstock to a 90-day supply or less (a two-month supply is normal), but it will also save money on day-to-day operating costs. 
The company’s sales in November were 47% lower than the previous year, so inventory bloat is an issue, but it’s really operating expenses that are killing their margins right now. A month-long shutdown is only two weeks longer than the usual holiday break, but it means not paying workers (46,000 of them) their hourly wages, as well as not paying for power, water, or materials (that will sit in storage until needed) during that time-span. (Chrysler employees who have been asked to return to work on January 19th, will be paid a reduced wage during the shutdown, partly from the company, and partly from state unemployment funds.). Earlier this year, the company had already closed cafeterias at many plants, and the executive dining room at corporate headquarters, in order to reduce cost.
GM
General Motors is probably in the worst position of the “big three,” and their attempts to reduce cuts, even beyond eliminating thousands of jobs, have taken on aspects of humiliation, from stocking the supply cabinets with cheaper (non-mechanical) 
pencils, to cancelling face-to-face meetings in favor of conference calls, to turning down the heat – not a pleasant prospect in the upper Midwest in December. Other cuts involve turning lights, escalators, and elevators off early in the day – though Mark LaNeve, head of GM’s North American sales and marketing team, which offices are on the 39th floor, recently asked for a reversal of one of those decisions, “This cost-cutting has touched every aspect of the company,” he said. “But my people are working until 8 p.m. and need the elevators to stay on.”
In addition to internal cost-saving measures, GM will be idling 20 of its North American plants during the first quarter of 2009, and has already taken steps to reduce inventory of spare parts, using a program called “share the spare” in which a group of nearby factories stock a single part for a production machine such as a conveyor belt, and keeping the number of on-hand axles, fenders, and steering gears to minimal levels.
GM will be receiving $9.4 billion from the emergency fund.
Ford
According to CNN, and the New York Times, Ford is “the healthiest patient in the ICU,” which basically means it has enough cash to survive the year, thanks to private funds it can tap, and is getting nothing from today’s announced emergency loans, but that doesn’t mean they’re in tip-top shape.
Jobs have been cut there, too, and there is closer scrutiny being paid to every expense, including some items that never were. Mark Fields, head of Ford’s Americas division, has been holding weekly meetings with his senior executives in order to review every request of $10,000 or more. In addition, there has been some trimming of internal fat. For example, instead of having offices cleaned daily, the cleaning crews now come only once a week.
Overall, the big three combined have eliminated more than 150,000 jobs since 2006, but, lest you think the issues in the auto industry are limited to these companies, sales across the industry have declined 16% this year.
What Does the Future Hold?
Chrysler and GM may have received emergency funds, but the money given comes with a whole tangle of strings. For one thing, corporate bonuses and salaries are being watched very carefully. For another, this is a short term loan, only, and the companies must demonstrate viability by the end of March, 2009, or all funds must be returned to the government.
The bottom line? The American auto industry is in a sort of limbo. While it’s usual for plants to idle over the holidays, only time will tell us if the lights ever go back on.
