Chrysler's announced month-long plant shutdown will have lasting effects on suppliers--including those in the material handling industry.

Tom Andel, Editor-in-chief -- Modern Materials Handling, 12/18/2008 3:22:00 PM

Chrysler LLC just announced it is closing its 30 manufacturing plants for a month in response to poor auto sales. The Associated Press reported that by extending the traditional two-week holiday shutdown period, the struggling Auburn Hills, Mich.-based automaker will be able to adjust production to slowing demand and conserve cash.

Meanwhile, Ford will be shutting down everything but two assembly plants that make light duty trucks and GM will close 20 assembly plants. Even Toyota, Honda and Nissan have cut back. The question is, what happens after that month is up? Nothing, according to James Harbour, founder of  Harbour and Associates, automotive industry analyst and co-author of a new book, Factory Man, to be published by the Society of Manufacturing Engineers (SME) in February.

“Until the credit markets come back and the customers come back we’ll be in a permanent lull,” he told Modern. “They won’t come back after that month shut down. They need the money to wait out the turn in the market.”

In a statement this week, Chrysler said tighter credit markets are keeping buyers away from showrooms and its dealers are unable to close sales for buyers due to a lack of financing. Chrysler estimates that 20 to 25 percent of its volume has been lost due to the credit situation, and that sales in November slid 47.1 percent.

Without the anticipated bailout from Washington, Chrysler and General Motors could run out of cash by the end of the year. That will mean far-reaching effects across the entire automotive supply chain, and that includes the materials handling industry. That’s the bigger news, according to Harbour.

“I don’t know how some of these suppliers will last,” he said. “As for material handling, nobody in automotive will buy material handling equipment like racks, plastic containers etc. When you shut down 35% of your volume, you have enough containers to go around. If there’s a new model coming out you may have to buy dunnage for the containers. But you’re not buying material handling because you’re not moving anything around. Everything is dead hold.”

Harbour says the United States needs to develop industrial policy as Japan and China have.

“Japan’s focus is on which industries they’ll keep in that country and which they’ll get rid of,” he added. “Now they’re focusing on airplanes. Wings and fusilage are made in Japan by Kawasaki and Mitsubishi Heavy Industries. Who do you think will develop the next airplanes?”