As GM Deals With Underused Car Plants, Options Are Weighed15
General Motors currently runs all five of its passenger car plants at around 37 percent capacity, which costs the automaker money. Analysts expect GM will fix the situation in the near future—and it could mean plant closings.
The Detroit Free Press reported Friday that analysts believe the Lordstown, Ohio, plant is the most likely to close as it only builds the 2018 Chevrolet Cruze sedan. The hatchback is built in Mexico, and Lordstown now runs just a single shift to build the Cruze compact car. Cruze sedan production could join the hatchback in Mexico. GM CEO Mary Barra reportedly wouldn’t commit to the Lordstown plant’s future when questioned by lawmakers.
The move would certainly create a heated backlash from the Democratic-leaning United Auto Workers union (although many UAW members voted for President Trump), and President Trump himself. The president has threatened the possibility of levying a 25 percent tax on cars imported from Mexico and Canada in the past. Should tariffs be imposed, it would put GM in a tough spot.
A few other scenarios are possible, though. GM could face reduced profits and run the plants under capacity, close a U.S. plant and consolidate with another U.S. plant, or move production from another country to the U.S. Kristin Dziczek, a vice president at the Center for Automotive Research, believes the final option is the most likely.
Thus, we could see former car plants become truck and SUV plants as GM faces the possibility of tariffs and fiscal pressures weigh on it. Experts believe if enough vehicles returned to the U.S., GM could actually add new jobs.
Sam Abuelsamid, Navigant Research analyst, said even if GM does move some Mexican production to the U.S., it likely won’t be enough to fill the void. U.S. automakers have the ability to build 14 million vehicles yearly, but only produced 11 million. 1.3 million units come from GM’s underused car plants.
“In all likelihood, we’ll almost certainly see one, maybe two plants closing,” he said.
And if it comes to plant closures, things could get messy quickly. The current UAW contract expires next year and any whiff of a plant closure could force a strike.
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Buick Envision. More than 70,000 have been sold, all assembled in China. SAIC is laughing all the way to the bank.
China, like most other countries, expects manufacturers to export vehicles not just import them.
China imports a lot of vehicles too — 1.2 million in 2016.
This is wrong, Elroy.
China develops an automobile industry primarily for their own use. Look at these statistics, for 2017:
24,961,948 passenger cars sold
24,806,687 passenger cars produced
4,160,583 commercial vehicles sold
4,208,747 commercial vehicles produced
3,033,216 passenger cars produced
6,096,110 passenger cars sold
8,156,769 commercial vehicles produced
11,487,731 commercial vehicles sold
In China, the independent local producers don’t export much, since their quality is considered low in the possible destination countries, and the joint-ventures with foreign automobile producers are not really interested in exporting, because they would have to share the profit with their Chinese partner.
I guess that those roughly 70 thousand Buick Envision which have been exported to the USA are only a minimal part of the production in China, kind of leftover for which it does not pay to build a production line in the destination country.
carsalesbase.com gives sales figures for the Buick Envision http://carsalesbase.com/us-car-sales-data/buick/buick-envision/ and in there the link to sales in China. Let me just quote the figures for 2016 and 2017:
Went to test drive a GMC Terrain, noticed the 3 VIN code, told the salesman nevermind due to vehicle being Mexican built. Left dusgusted. Blazer is out for me too now. GM could have just as easily retooled Lordstown to a flex-line to assemble a small/ midsize CUV as well as Cuze. Instead they retool the the Mexican plant that currently makes Cruze Hatch only.
Hoping they move all of the Chevy Cruze to Mexico….That would make Tariff Trump happy..
One of the reasons certain vehicles are built in Mexico is their suitability for export markets.
Mexico has a network of 10 FTAs with 45 countries, 32 Reciprocal Investment Promotion and Protection Agreements (RIPPAs) with 33 countries, 9 trade agreements (Economic Complementation and Partial Scope Agreements) within the framework of the Latin American Integration Association (ALADI) and and it is a member of the Trans-Pacific Partnership Agreement (TPP)
GM could not export the models competitively to many markets with US built production. Having said that, a lot of components still come US.
How can a plant still be open at 37% capacity?
It’s time to stop pretending, and move all operations to China. That’s exactly where it’s going anyways and Ford is doing the same thing. There’s nothing that politicians can do in the long-term.
Well Lordstown is a unique issue. It is a plant that was rewarded with a very good selling compact that most plant fought over. The UAW here was rewarded as they have worked well with GM.
Neither the union, GM or anyone here predict the bottom would fall out of the car lines. Who here could have predicted Gord would kill off all cars but the Mustsng.
This is a time of transition. GM could not just put the Blazer in Lordstown this late in the game. They can plan to put a future product there and I expect they will.
The plant could shut down should GM look to cut production. It could be ideled like Springhill and then brought back on line when a suitable new model can be lined up.
Retooling takes time planning and investment. It takes models suitable in volume to fill the plant too. It takes matching these changes in a time line. With the drop in the market being unplanned it leaves few short term options.
GM has always built a limited number of vehicles just across the boarder. They are not of limited quality as some claim and often are tied to central and southern American markets.
They also use a lot of American content. My HHR used nearly 70% American content including a drive line built in a Springhill.
As for the Buick. It sold 70k units over two years. That is not many in the big picture. You really need to see around 100k units per year from a plant or more of that product.
The bottom line there is much more too this than we on the web consider.
As for the tariffs the negotiations are going on and America and Mexico are close to an agreement. Canada is a little father out but if Mexico is in they will have to come to terms or risk being left behind.
The bottom line is not everything is coming back to America. But the new deals will make what trade be have more equal both ways. Right now the deals are mostly easy to import here but tough to export.
May I reming readers what the acronym NAFTA does mean?
Three American countries in the North have agreed to form a free trade zone…
Mexico should have better joined Mercosur and ALBA instead of becoming the maquiladora for the US big business. Pobre Mexico! Tan lejos de dios, y tan cerca de EE.UU.! (who was the president of Mexico who coined this so truthful phrase? And yes, Mexico is located in America, not in Europe, Africa, Asia or Antartica, and also not on the moon).
I know this one is out of left field but hear me out. I’ve always felt GM should get back into a field they got out of pre-bankruptcy and that is rail. Not the big Electromotive engines however. Imagine if you will a company that could mass produce components for electrified light rail systems and bring the price point down to where multiple cities and towns could acquire them. This would be a great adjunct to GM’s electric vehicle business. There is a crying need for this, and remember just because someone uses a commuter train does not mean they are not still going to buy a car.
GM is not going to get back into rail, and while you may believe there’s a “crying need” for it, in actuality there is no such need and it is not economically feasible. In the areas of the US where mass transit is now increasingly needed and desired, they are increasingly more urban and real estate values are astronomical.
Until the issue of congestion becomes so economically unbearable to become economically feasible, there will be no change—and that will never happen barring some kind of domestic war or catastrophe that lets us start from square one, like Europe post WW2.
It would serve Trump well if they moved all of the Chevy Cruze to Mexico and i hope they do just that..
Tesla is proving that the market is out there, maybe GM should re-tool for the one that will really sell; an electric SUV!
Just test drove 4 full electric cars this week. The experience is so far superior in every way. Smooth quiet and a joy to drive. The entire market is going that way. China has clearly dictated it and it will happen whether the backward looking people like it or not.