GM delays factory that will build Volt engine

updated 3:58 p.m. ET Dec. 17, 2008

DETROIT - General Motors Corp., anxiously awaiting a government loan so it can continue operations into 2009 said Wednesday it will halt one of its most important projects to save money should a Washington bailout fall through.

The cash-strapped automaker is putting the breaks on the construction of a factory in Flint, Mich. set to make 1.4 liter engines for the Chevrolet Cruze and Chevy Volt plug-in electric car.

The move comes as GM scales back on just about everything, from corporate sponsorships to vehicle production and utility costs — even pens — to save every cent it can to stay afloat.

Some executives say the company may have enough money to make it through January without federal aid, yet GM must make payments to large suppliers in early January, further complicating its cash position.

GM is seeking up to $18 billion in government loans as it tries to survive the worst U.S. auto sales environment in 26 years. The company has said it is running low on cash and may not be able to pay all of its bills after the first of the year without government help.

GM is delaying the purchase of big-ticket items, such as structural steel to build the new Flint factory, located 50 miles northwest of Detroit. GM announced in September its plan to build the new plant on its existing Flint site, with production to begin sometime in 2010.

“Those are huge cash outlays, and we don’t have the cash,” said spokeswoman Sharon Basel.

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

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

The plant’s engines will extend the range of the rechargeable Volt, which GM says will be able to travel 40 miles on electricity alone. They will also power the Cruze, GM’s next-generation small car that is supposed to get around 40 miles per gallon.

Basel said she did not know if anything has been delayed at GM’s Detroit-Hamtramck assembly plant, where the Volt is supposed to be built, or at the Lordstown, Ohio, factory where the Cruze will be assembled.

The construction delay was reported Wednesday by The Flint Journal on its Web site.

Basel said it’s part of GM’s overall effort to conserve cash until a decision is made on the government loans. President Bush stepped forward to say he would act to save the domestic auto industry after a bill authorizing the loans was thwarted in Congress.

Basel would not say when construction might resume if government loans are made available, but she said there is plenty of time to build the plant, install equipment and get it up and running in time to produce engines for the two new cars. The company already makes the 1.4-liter engine at a plant in Austria, she said, giving GM another option for supplying the 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.

GM said in September it would invest $370 million 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 $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 August.

The state of Michigan approved $132.5 million in tax incentives for the automaker to spend $838 million on the new plant and upgrade of four other facilities.

More on: Chevy Volt  |  electric cars

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