Chrysler cuts production, closes plant and extends summer holiday

Rampant speculation about the short-term future of Chrysler has been circulating the web for the past week or more, with pundits and analysts alternately claiming bankruptcy or sale equally likely. Chrysler has officially denied all claims of an impending bankruptcy, but it has decided to reduce its total U.S. output for the year, including possibly idling its St. Louis plant.

The Missouri plant, located in Fenton, just south of St. Louis, employs 1,500 workers, mostly building minivans in a single shift. The latest announcement reveals it will go on 'indefinite idle' by October 31. Weak sales of its Town & Country (down 13.4%) and Grand Caravan (down 34.6%) through May have led to the cutback, reports The wall Street Journal. Truck production at Chrysler's other St. Louis plant will also be reduced. The end result of the reductions will be 2,400 workers laid off.

An extended summer holiday for several plants will also be used to reduce overall output. Some length of summer hiatus is normal for the U.S. auto industry, but Chrysler's down time will be extended beyond traditional periods, reports The Detroit News, though exactly how long the vacations will last is unknown.

Not all is headed downhill at the carmaker, however, with production of the company's smallest cars actually ramping up as it tries to capitalize on its limited ability to meet consumer demand. The plants where the Jeep Patriot and Compass, the Dodge Avenger and Caliber, and the Chrysler Sebring are built are all working overtime to produce more of the company's smallest, most efficient vehicles.

This announcement could be the beginning of a new round of production cuts for the maker. In early June, analysts were predicting Chrysler would be forced to reduce its workforce and vehicle output before the end of the year. Last November, the company announced it would cut between 8,500 and 10,000 hourly-wage jobs by the end of 2008.