General Motors has frozen all nonessential spending and travel as it analyzes the full potential impact that the recent earthquake and tsunami in Japan may have on the company.

GM stopping all non-critical expenses

GM Chairman and Chief Executive posted a note on the company’s employee website saying the organization is holding off on any expenses that are not critical in an attempt to lower the financial fallout that may result from the Japan crisis. Sources say GM has already taken steps to shut down a factory in Shreveport, Louisiana, that manufactures small trucks.

Moreover, GM – which the Wall Street Journal reports has voiced its concerns regarding the effect of the disaster on production more than any other Detroit automaker – announced it also shutting down a plant in Zaragoza, Spain, and is severely cutting shifts at another factory in Eisenach, Germany.

Spokesman Klaus-Peter Martin told the Minneapolis Star Tribune that GM is adjusting as necessary to reduce the financial impact of the Japanese tragedy on the company.

“The whole industry is still in the process of figuring out what the implications are from the disaster in Japan,” he said.

Industry-wide impact of the disaster

Multiple automakers have either closed factories or reduced production in the aftermath of the tsunami. According to Reuters, Japanese automakers alone are expected to lose about 65 percent in light vehicle production in the two weeks following the disaster. The small country, a hot-bed for car manufacturers, normally produces about 37,200 a day, reported the source, coming to about 521,000 in a two-week period. IHS Automotive Insight told Reuters that it could take seven weeks of full production with overtime at one factory to make up for just one week of lost production.

Toyota, which the New York Times said produces almost half of the vehicles the company sells world-wide in Japan, has temporarily halted production at all 12 of its Japanese plants. Many car dealers are concerned about the hold, since demand for the Prius hybrid – which is only manufactured in Japan – has skyrocketed. In addition, Toyota has had to postpone the launch of its new wagon-version of the Prius that was set to go on sale in the in April.

According to the Wall Street Journal, the delays in production could make 2011 a bad year to purchase a new car. Japanese factories primarily produce the components necessary for many hybrid vehicles and are also a leading manufacturer of energy efficient economy cars such as the Honda Fit and Toyota Yaris. If supplies dry up, the newspaper said consumers may find themselves paying full price – or even higher – for vehicles that were discounted only a few weeks ago.  

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