Thursday, January 15, 2009

GM puts Volt engine plant on hold

General Motors, anxiously conserving cash so it can keep operating into 2009, said on Wed it would halt construction of a plant tied to one of its most important projects while the automaker awaits a Washington bailout.

GM said it is putting the brakes on the construction of a factory in Flint, Michigan, set to make 1.4l engines for the Chevrolet Cruze and the Chevy Volt plug-in electric car.

It's just one more effort by GM to hold on to every penny possible as it speeds closer to the day when the 100-year-old industrial giant won't be able to pay its bills.

The company has been scaling back just about everywhere - shutting down vehicle production, ending sports sponsorships, turning off escalators and even cutting back on office supplies - to stay afloat.

GM is seeking up to US$18bil in government loans as it tries to survive the worst US auto sales environment in 26 years. It says it needs US$4bil before this year runs out.

GM board member Kent Kresa told The Associated Press last week that the company might make it into the early part of the first quarter, depending on auto sales, yet GM has several billion dollars worth of supplier payments due shortly after the first of the year, and analysts have said the company probably doesn't have the cash to pay them.

GM announced plans in Sept for the new engine plant in Flint, 50 miles northwest of Detroit, and said production would begin in 2010. But the company is delaying the purchase of big-ticket items needed to build the factory, such as structural steel, spokeswoman Sharon Basel said.

The plant's engines will extend the range of the rechargeable Volt, GM's high-profile next-generation vehicle that will be able to travel 40 miles on electricity alone. They will also power the Cruze, GM's new small car that is supposed to get around 40mpg.

Basel said Volt and Cruze development will continue as scheduled and the company still plans to bring them to showrooms in 2010. The construction delay, she said, may be temporary until the company figures out its cash situation.

"Everything that involves heavy cash outlays obviously is under review," Basel said. "Our intent is to still go forward with a new facility bringing that engine to Flint."

Meanwhile, GM has held off many large expenditures, such as the steel for the Flint plant, Basel said."Those are huge cash outlays, and we don't have the cash," she said.

Basel said there is plenty of time to build the factory, install equipment and get it up and running in time to produce engines for the two new cars. The company already makes the 1.4l engine at a plant in Austria, she said, giving it another option for engines.

"We have lots of options. The construction of the new plant is not going to interrupt our plans for the Volt or Cruze," Basel said.

Work will continue as scheduled on the Lordstown, Ohio, assembly plant, which will make the Cruze starting in mid-2010, said GM spokesman Chris Lee. The company has not formally announced where the Volt will be built, although the Detroit-Hamtramck Assembly Plant was identified in the 2007 contract with the United Auto Workers. Lee said Volt production remains on schedule for later in 2010.

GM said in Sept it would invest US$370mil in the new factory, which will employ 330 hourly and salaried workers and allow the company to double its global production of smaller engines by 2011. The plant will have 300 flexible work stations that will let GM build different four-cylinder engines without retooling.

The United Auto Workers union agreed that new hires for the plant would be paid US$14 per hour, about half the wages of a current UAW worker. It also agreed to a new flexible pact with GM that lets workers do multiple jobs.

The new factory brings the prospect of more jobs to an industrial city hard hit by auto job losses. GM's nearby Flint Engine North plant closed in Aug. - AP

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