Volt Engine Plant Construction Put on Hold

In a drastic measure to save cash for the time being, General Motors will freeze construction of a new plant meant to house manufacturing of the Chevrolet Volt engine. The plug-in hybrid car is seen as the most critical cog to returning GM to profitabiity.

The new plant in Flint, Michigan, was scheduled to make the 1.4-liter engine also shared by the tiny Chevrolet Cruze. Chevy's Cruze is expected to get around 40 mpg.

Somehow, GM still expects to deliver the two cars on time in 2010, but their weak cash position could put the project in jeopardy. Company spokeswoman Sharon Basel said, "Everything that involves heavy cash outlays obviously is under review."

One consideration is to up production at a plant in Australia where the same engine is made. However, this move would likely increase manufacturing cost, and thus increase MSRP.

"Our intent is to still go forward with a new facility bringing that engine to Flint, Michigan," she told the AP.

Facing the worst American auto sales in 26 years, GM is waiting for $18 billion in U.S. government backed bailout loans. They say they need $4 billion within the month in order to make supplier payments due in January. Missing those payments could mean a GM bankruptcy. Bailout funding was abandoned by the U.S. Senate, but President George W. Bush could authorize money to come from a fund intended for financial institutions.

GM's $370 million Flint plant was announced in September, with production there to begin in 2010. New hires amongst the 330 hourly and salaried employees that will work in the factory will earn $14 per hour, roughly half that of current employees.

The company is postponing purchase of items like structural steel needed to build the factory. The plant delay is one of many cutback measures. They have also shut down vehicle production, and terminated sports sponsorship agreements. Sounding a bit like RyanAir, GM has cut down on office supplies, and even turned off escalators in their facilities.