With an economic pothole coming up fast, the auto industry is stepping on the brakes - hard.
The Big 3 are slashing production schedules, cutting internal costs and squeezing suppliers. Suppliers are scrambling to slow or close plants and looking for other savings. Meanwhile, vehicles pile up on dealers' lots.
General Motors plans first-quarter 2001 output of 1.3 million vehicles in North America. That's 221,000 fewer vehicles than in the first quarter of 2000.
Similarly, Ford Motor Co. plans first-quarter 2001 North American production of 1.2 million vehicles, 113,000 fewer than in the first quarter of 2000.
DaimlerChrysler's American operations also have pared output. Although the automaker has not publicly forecast its first-quarter 2001 North American production, it has cut 146,000 vehicles from its fourth-quarter 2000 scheduled output.
The industry expected the blistering 17-million-unit sales pace of the past two years to end, but the slowdown has been abrupt.
DaimlerChrysler jolted suppliers on Thursday, Dec. 7, by demanding a 5 percent cost cut by Jan. 1 - a move the automaker expects will save $2 billion next year - and an additional 10 percent by 2003.
The move is a key element of new President Dieter Zetsche's plan to stanch the financial bleeding at the automaker's U.S. operations, which lost $512 million in the third quarter and is on track to lose close to $1 billion in the fourth quarter.
But Randolph Barba, a partner with Andersen Consulting in Chicago, isn't so sure the supplier trims will come easily.
'A lot of suppliers are running on pretty low margins already,' Barba said. 'Some of them may have to say no to these demands.
'I'd say we're heading for a little bit harder fall in automotive than anyone expected.'