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Gary Gloden of Mason inspects a Cadillac CTS in the brake and AC repair hole at the GM Lansing Grand River plant.Factories at risk
At least 6 plants expected to close
Other than Lansing's M factory, seven others in Michigan expect to be spared shutdowns.
David Helms, a General Motors employee from Noble, Okla., works on the assembly line at the GM plant in Oklahoma City.
Road to recovery?
Will reducing its workforce by 25,000, closing some factories and paring product lines put GM on the right track?
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General Motors Corp.'s plan to slash its U.S. manufacturing work force by more than 20 percent is expected to lead to the closure of at least half a dozen North American auto parts and assembly plants, manufacturing experts say.
Except for GM's Lansing "M" assembly plant already slated for closure, the automaker's seven other Michigan assembly plants are likely to be spared, they said.
But some component factories in the state, such as powertrain plants in Livonia and Bay City, might be at risk as GM moves to streamline its costly North American manufacturing network.
GM lost $1.1 billion in the first quarter due to weaker sales in North America, where its costs are high and its share of the market is dwindling.
The automaker has previously announced plans to cut or idle three of its 29 North American assembly plants. GM Chairman and CEO Rick Wagoner said Tuesday that more assembly and component plants would be shuttered over the next few years. The new plant closures and job cuts, mostly through attrition, will save the company $2.5 billion annually, Wagoner said, but he gave no other details.
Sean McAlinden, chief economist at the Center for Automotive Research in Ann Arbor, estimates GM's job-cutting plan "works out to about four assembly plants, a couple of stamping plants and a couple of powertrain plants."
Among the most vulnerable factories are those churning out large sport utility vehicles, such as GM's Janesville, Wis., plant, which makes the aging Chevrolet Tahoe and GMC Yukon, said Jesse Toprak, senior analyst at online auto research site Edmunds.com.
He said GM's compact- and midsize-car factories run more efficiently, given a slew of new models and consumers' growing demand for cars and waning appetite for traditional truck-based SUVs.
GM also has too much production capacity in its midsize-SUV plants and may need to pare pickup truck output, although they are among its strongest sellers.
With the threat of closure in the air, plants will be pitted against one another as GM seeks the best terms before assigning production of future models. A plant that gets a future model is guaranteed a few years of work while those that don't, such as GM's Linden, N.J., plant, are exposed to cutbacks.
GM plants in Moraine, Ohio, and Oklahoma City are both struggling with declining production of midsize SUVs, such as the Chevrolet TrailBlazer. Plants in Janesville and Arlington, Texas, also are at risk, as they both make dwindling numbers of the same large SUVs.
But at the Janesville plant, workers feel more threatened by GM's low-cost, foreign plants.
"It's not so much us against Arlington, but us against the Silao plant in Mexico," said John Dohner, shop chairman for United Auto Workers Local 95 at the Wisconsin plant. "They've got people there working for peanuts."
Another U.S. plant whose future seems uncertain is GM's Doraville, Ga., minivan plant.
GM workers were demoralized by the planned job cuts. The automaker runs some of the most productive plants in North America, and its vehicles score higher in quality surveys than those of its Detroit rivals Ford Motor Co. and DaimlerChrysler AG's Chrysler Group.
But investors have clamored for a restructuring to bring GM's output in line with its current market share of around 25 percent -- and some wanted deeper cuts to allow GM to focus on profitable models.
Analyst Stephen Girsky at Morgan Stanley recently estimated that 45 percent of GM's North American production capacity -- the equivalent of 15 plants -- is unused or produces models that generate little or no profit, such as vehicles sold at cut rates to employees and cars sold to rental fleets.
"Although it's very hard for people whose jobs are being cut, purely from a business standpoint, it's the right decision for GM because overproduction has been one of the main problems at GM," Toprak said.
"These measures have to be taken at times for the long-term health of the organization."
GM's North American factories run on average at 85 percent of their capacity, and that means its costs relative to revenue are much higher than those of rivals such as Toyota Motor Corp. The Japanese automaker's capacity utilization rate in North America is 107 percent, with plants running overtime to meet demand.
"We need to get 100 percent capacity utilization or better," Wagoner said. He said prior output cuts and plant closures would reduce GM's North American capacity to 5 million vehicles by the end of the year, from 6 million in 2002.
The job cuts indicate GM will cut capacity to around 4.5 million vehicles -- roughly in line with its market share, McAlinden said.
He said GM's effort to use surplus capacity fueled its unhealthy reliance on discounts. "All the rebate stuff is about getting the last five points of market share -- they don't really want your vehicle and they're people you bribe. The first 18 percent want the GM vehicle."
You can reach Christine Tierney at (313) 222-1463 or ctierney@ detnews.com.
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