Chrysler Forced To Shut 4 Plants As Suppliers Stop Shipments

Chrysler LLC has shut down four of its assembly plants as some parts suppliers stop shipments following the auto maker's bankruptcy filing.

The auto maker confirmed Friday it has closed its two Canada plants, as well as its Sterling Heights and Warren assembly facilities, both in Michigan. The closures come as Chrysler gets set to idle all of its U.S. plants beginning Monday for the 60 days that the company expects the bankruptcy process to last.

News of the early plant shutdowns provides an indication of the dramatic impact that Chrysler's bankruptcy stands to have on suppliers and manufactures. Suppliers, battered by 18 months of production cutbacks by their auto making customers, are bound to suffer from even-deeper production cuts. As suppliers' fortunes fade, all manufacturers could find themselves without the parts they need to maintain operations.

The effect of Chrysler's two-month shutdown is compounded by the fact GM plans to take down as many 13 North American plants to control inventory. American Axle & Manufacturing Holdings Inc. (AXL), a major supplier to both companies, said Friday it expects to lose $250 million in sales revenue as the factories shut for most of the summer.

Chrysler warned in court filings Thursday that many parts makers could follow the auto maker into Chapter 11 without a quick conclusion to its bankruptcy process.

"Without a clear timeline for when the (bankruptcy) situation will end and production will resume, I believe we will see massive suppliers bankruptcies that will stop Chrysler from resuming production," Chrysler's procurement officer Scott Garberding said in a statement filed with the bankruptcy court Thursday.

Of Chrysler's top 100 parts makers, 84 also provide parts to General Motors Corp. (GM) and Ford Motor Co. (F). The majority of those suppliers also provide parts to the foreign auto makers operating in the U.S. such as Toyota Motor Co. (TM)

Garberding, who said he spent as much as 40% of his time working on economically stressed suppliers, warned that the sector is in a fragile state. About 10% of Chrysler's suppliers were listed as "high risk, risk or concern" by the company in October 2008, but the percentage rose to about 30% in March, Garberding said.

-By Jeff Bennett, Dow Jones Newswires; [e-mail]; 248-204-5542

(Sharon Terlep contributed to this article)