Plant Closings May Not Be Over For GM
July 17, 2009
By Bill Visnic
When General Motors Corp. announced 14 plant closings or standby shutdowns as part of its bankruptcy restructuring, the news hit hard - particularly for the thousands of workers tied to those facilities.
GM, which emerged from bankruptcy last Friday, has acknowledged its manufacturing empire must be smaller, leaner and meaner to match its emaciated market share as well as its profitable rivals' costs. While 14 facilities sounds like a lot, the move may not go far enough for the consolidation required to align production with the demands of a company with only four divisions.
GM CEO Fritz Henderson suggested in his press briefings after the automaker's emergence from bankruptcy that plant closings are over. "We did what we needed to do to right-size our capacity and our people assuming a 10 million (seasonally adjusted annualized rate of sales) breakeven," Henderson said.
But the numbers don't add.
GM's estimate of the market share it will achieve with its remaining four brands - Buick, Cadillac, Chevrolet and GMC - looks like it could be inflated, which translates into too much capacity. Bank of America Securities-Merrill Lynch this week released its Car Wars report, its annual competitive analysis of automakers in which it forecasts GM's market share at 15 to 16 percent, not the 18 to 19 percent GM predicts.
A 3-percent discrepancy means GM would sell 500,000 fewer vehicles -- or need about two fewer assembly plants -- if U.S. consumers purchase 14 million cars and trucks, the report said. That suggests more plant closures could be in GM's future.
Further, elimination of the four announced assembly plants - likely to be just three and possibly two, actually - doesn't get GM anywhere near the 100 percent utilization of its assembly capacity it promises by 2011. And at least two of the assembly plants GM has earmarked for closure are in the minor leagues in terms of volume, anyway.
Based strictly on the number of vehicles assembled in 2008, the four assembly plants GM will close or are on "standby" - Pontiac, Mich.; Orion, Mich.; Spring Hill, Tenn. and Wilmington, Del. - produced just 348,664 units last year. That's not quite 12 percent of the 2,980,000 vehicles GM delivered in North America.
GM has announced the Orion plant will be unmothballed rather quickly to produce small cars. And Spring Hill is a prime candidate for a future product as it is one of GM's newest and in which GM recently invested nearly $700 million to update and re-tool.
While what was produced in 2008 is not representative of the full capacity of these sites, the production numbers nonetheless are representative of the relative meagerness of GM's planned contraction.
Even if the 2008 production from these sites would be assumed to represent just two-thirds of the plants' actual straight-time capacity, the total still would amount to little more than 15 percent of GM's North American deliveries in what was a markedly depressed sales year.
A look at the major assembly plants on GM's closure/standby list shows the capacity-reduction effect doesn't stray meaningfully beyond what the discontinuance of Pontiac and Saturn would have dictated anyway:
Orion Assembly, Orion Township, Mich.
This is the only one of the four assembly plants to account for high-volume production last year, building 168,908 Pontiac G6s and 41,111 Chevrolet Malibus. But more critical to GM's future, the company named Orion as the production site for derivations of its next generation of compact and subcompact cars, possibly the next Chevy Aveo (currently imported from Korea) or a new model derived from the Chevy Cruze underpinnings, likely a production version of the Orlando compact crossover.
GM says the plant is on "standby capacity" until September, around which time current G6 and Malibu production ends. The $600-million to $800-million retooling for the small cars begins next year. GM said last month the Orion plant's small-car capacity will be 160,000 units.
Pontiac Assembly, Pontiac, Mich.
Just 76,701 examples of the Chevrolet Silverado and GMC Sierra full-size pickups were built here last year. Unless GM finally discloses the gasoline-from-water process it's been sitting on all these years, the company must eventually deal with cutting more full- size pickup production than has ever come from this single plant that GM definitively says is closing in October.
Spring Hill, Tenn.
Once the exclusive home of Saturn production, Spring Hill - one of GM's newer assembly plants built in 1990 - was retooled to the tune of $690-million in 2007 to convert to production of the Chevy Traverse full-size crossover.
The Traverse is going to the Lansing, Mich., plant that produces the other three current badge-engineered versions of the Traverse (the Saturn Outlook variant goes away). The
recent large investment made Spring Hill a candidate for the future small-car production, but GM gave the nod to Orion.
GM lists the status of Spring Hill as standby capacity until November.
Wilmington, Del.
The Gamma-platform roadsters - Pontiac Solstice, Saturn Sky and Opel Roadster - come from this low-volume plant that has no options. Just 18,842 of the handsome but packaging-challenged Gamma roadsters were built last year, and GM has been anxious to shutter this site, which closes permanently this month.
The breadth of four assembly-plant shutterings may have been enough to convince President Obama's Auto Industry Task Force that GM is serious about downsizing its manufacturing, but the Orion plant is being recommissioned - and the rest would have gone away with Pontiac and Saturn.
Not that this isn't a start. But it's not until GM gets down to dealing with its overabundance of full-size pickup and SUV production that the shareholder nation will know the company is serious about right-sizing itself.
Photos by GM
1 - A worker assembles at Pontiac G6 at GM's Orion Township, Mich., plant.
2 - GM's Orion Township, Mich., plant now builds the Pontiac G6 (pictured) and the Chevrolet Malibu, but it soon will produce GM small cars.
3 - A worker assembles a Pontiac Solstice at GM's Wilmington, Del., plant, set for permanent closure with the demise of elimination of the Pontiac brand and the sale of the Saturn brand.
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