GM announced the elimination of work shifts at four plants that will reduce production output by 138,000 units, 88,000 full-size pickups and 50,000 full-size SUVs, in 2008. Beginning 14 July 2008, Flint Truck becomes a two-shift operation with Janesville and Pontiac East moving to one shift. GM had previously announced plans for Pontiac East to lose a shift, but the UAW-American Axle & Manufacturing strike has pushed that date back. After being cut to two shifts in January, Oshawa Truck is slated to lose another shift on 8 September 2008.
In relation to CSM Worldwide’s April forecast, production plans affecting those facilities will result in an 80,000-unit reduction for GMT900 vehicles in 2008. These reductions do not take into consideration the ongoing American Axle strike impact on GMT900 production. Should the strike linger through the month of May, total GMT900 production could be reduced an additional 43,000 units to 123,000 units for the year. Collectively, GM continues to lose over 7,500 units per day due to the American Axle strike with potential for further production weakness should the strike linger into June ahead of the 2009MY start-up.
Inventory for combined GMT900-based vehicles was over 400,000 units or more than a 110-day supply at the end of March according to Autodata. With 2009MY production scheduled to begin in late June and July, there is little motivation for GM to build what would effectively be incremental 2008MY inventory due to considerable market weakness. A fraction of lost production due to the strike would be recouped with 2009MY output bolstering 3Q 2008 build rates. Stronger build rates through the summer may also be supported by a possible strike bank should negotiations with the CAW break down in September. GM secures a significant number of engines from the St. Catherine’s plant in Ontario.
GM’s actions go further than a reaction to weakening market demand that is more adversely impacting the full-size truck segments. Amid the American Axle strike and UAW Local strike threats, GM is reasserting itself, putting workers and plants on notice. The most politically motivated action is with Oshawa Truck with the planned shift reduction only days before the CAW contract expires in mid-September. GM’s Oshawa facilities have long been recognized for quality and productivity, but they have been hit hard due to the weak US dollar. The announced shift reduction provides GM with a negotiation tool ahead of September’s CAW talks.
The Oshawa Truck plant also stands out as the primary source for light-duty crew cab models among GM’s network of six GMT900 full-size pickup plants. Additionally, Oshawa will be the sole source for the Two-Mode Hybrid Silverado and Sierra models beginning this fall. Despite the strong Canadian dollar, GM will want and need to maintain a presence in Canada to offset any changes in exchange rates in the future. Unfortunately for Oshawa, GM has enough existing capacity to shift volume between the various GMT900 pickup plants, adding another bargaining chip come September.
These actions also provide a glimpse at the future status of some GMT900 plants. As consumers shift from full-size trucks and stringent fuel economy standards in the coming years, GM will not need the existing manufacturing footprint for the C3XX-based replacement programs. With these latest plant actions, GM is providing a grim future for the Janesville and Pontiac East plants. Arlington has favored status with exclusive production of the Two-Mode Hybrid SUVs in addition to being the sole source of the Escalade and Escalade ESV, while Pontiac East has served primarily as an overflow plant for heavy-duty pickup production to support Flint Truck.
More worrisome is the impact to GMT900 production in 2009 and beyond, with preliminary estimates accounting for volume reductions that exceed 150,000 units based on these plant actions. This latest move marks another step by GM to trim its higher-cost union work force and even raises the prospects of increasing buyout opportunities from fearful employees. As demand recovers, GM can fill the previous roles with reduced-wage workers. GM is also mindful of not only today’s market weakness, but the impending arrival of the redesigned Ford F-Series and Dodge Ram due in showrooms late this summer that will crimp demand for the Silverado and Sierra well into 2009.
Despite these actions, GM is upping the ante on the car side, offering a new round of incentives to help bolster sales through this difficult time. As much as 40,000 units of car production could be added into the upcoming May forecast for vehicles and plants that produce the Cobalt, Malibu, Impala and CTS. Additional weakness for GM comes from the possible early demise of the fleet-oriented Chevrolet Uplander minivan. GM had intended to have a short 2009MY run of the Uplander through September, but all signs point to production ending in late June, resulting in a loss of around 30,000 units.
CSM will continue to monitor events and provide further updates as warranted.
For questions, please contact:
Joe Langley,
Senior Analyst, North American Vehicle Forecasts,
at joelangley@csmauto.com or +1 248 465 2832
Mike Jackson,
Director, North American Vehicle Forecasts,
at mikejackson@csmauto.com or +1 248 465 2833
CSM Worldwide provides trusted automotive market forecasting services and strategic advisory solutions to the world’s top automotive manufacturers, suppliers and financial organizations. CSM Worldwide covers the global automotive environment from Detroit, Grand Rapids, Frankfurt, London, Paris, Shanghai, Tokyo, São Paulo, Budapest, Delhi and Bangkok.
