Automakers Bracing for Downturn

20 November 2000

    NEW YORK - Automobile industry insiders are seeing a downturn that may send 
auto sales and profits plunging in 2001, Newsweek reports in the current issue. 
"People are definitely more nervous than they were six months ago," GM CEO 
Richard Wagoner tells Newsweek.
    
    Detroit Bureau Chief Keith Naughton reports that some of the classic signs
of a serious auto industry downturn are already emerging -- such as inventories 
rising as unsold cars pile up on dealer lots. Last week, Chrysler President 
Jim Holden was fired by his German bosses at DaimlerChrysler after the U.S. unit 
lost a half-billion dollars in the third quarter. This week, Chrysler and GM 
idled five factories to reduce bloated inventories, Naughton reports in the 
November 27 issue.

    Throughout the automotive industry, everyone is preparing for the worst.
Naughton reports:

    *     Executives at GM are ordering employees to send e-mail instead of
          making long-distance phone calls and to videoconference rather than
          fly cross-country for meetings.

    *     Big parts makers, squeezed by auto companies to cut prices, are
          canceling plans to show their wares at Detroit's premier
          auto-engineering convention in March.

    *     Chrysler is considering white-collar layoffs and slashed its annual
          product-development budget by 25 percent.

    *     For January's black-tie "auto-prom," which celebrates the opening of
          the Detroit auto show, companies aren't paying the $350-per-ticket
          cost for the executives who are attending. "We said, 'Hey
          executives, we pay you good money, we think you can afford to pay
          your own way'," says General Motors vice president Bill Lovejoy, who
          will spend more than $1,000 to take his wife and a few friends to
          the event. "We want to show our work force that we're tightening out
          belts. It's that monkey-see, monkey-do effect."