Scent of Defeat

21 November 2005



Not-Bankrupt GM Closing Plants

The talk on Wall Street has been the imminent demise of Ford and General Motors. While the Street never gets things quite right, always the victim of excessive exuberance or excessive gloom, the two are in trouble. General Motors, and its troubles with supplier Delphi, was the target of Chapter 11 rumors last week. So, this morning, GM boss Rick Wagoner is announcing the closing of plants out of the 29 GM has in North America. The question is whether this is cost cutting the 30,000 layoffs represent will enough.

Mr. Wagoner says the idea is to get capacity for match demand in 2008, eliminating about 25% of the factory workforce. This attitude betrays a defeatism that he surely didn’t mean to convey. Decent cars, properly priced would bring demand up to capacity. Implicit in his approach is a belief that that can’t or won’t happen. Maybe he just can’t believe America can’t afford SUVs, GM’s mark of excellence, with gas at $2.50 a gallon.

The cuts he’s announced will yield savings of $2.5 billion, and since GM is set to lose about $4 billion this year, it won’t be enough. Throw in early retirement costs and employee relocation packages, and GM may have to give up $2 billion of the savings according to some analysts interviewed by Reuters.

Just as this journal was preparing to post to the web, GM’s press release hit the wires. The closings are:

  • Oklahoma City, Okla., will cease production in early 2006.
  • Lansing, Mich., Craft Center will cease production in mid-2006.
  • Spring Hill, Tenn., Plant/Line No. 1, will cease production at the end of 2006.
  • Doraville, Ga., will cease production at the end of its current products' lifecycle in 2008.
  • The third shift will be removed at Oshawa Car Plant No. 1, in Ontario, Canada, in the second half of 2006. Subsequently, Oshawa Car Plant No. 2 will cease production after the current product runs out in 2008.
  • The third shift will be removed at Moraine, Ohio, during 2006, with timing to be based on market demand.
Capacity-related actions affecting stamping, Service & Parts Operations and powertrain facilities include:
  • The Lansing, Mich., Metal Center will cease production in 2006.
  • The Pittsburgh, Pa., Metal Center will cease production in 2007.
  • The Parts Distribution Center in Portland, Ore., will cease operations in 2006; the Parts Distribution Center in St. Louis, Mo., will cease warehousing activities and will be converted to a collision center facility in 2006; the Parts Processing Center in Ypsilanti, Mich., will cease operations in 2007. One additional Parts Processing Center, to be announced at a later date, will also cease operations in 2007.
  • The competitiveness of all unitizing (packaging) operations at the Pontiac, Drayton Plains, and Ypsilanti Processing Centers in Michigan, as well as portions of the unitizing operations at the Flint, Mich., Processing Center will be evaluated in accordance with the provisions of the GM-UAW national agreement.
  • St. Catharines Ontario Street West powertrain components facility in Ontario, Canada, will cease production in 2008.
  • The Flint, Mich., North 3800 engine facility ("Factory 36") will cease production in 2008.
Based on this, it is not hard to see Toyota will be America’s #1 car company soon, and only an Act of Congress can stop it. They would be wise not to do so, as GM appears incapable of competing under current management.

© Copyright 2005 by The Kensington Review, J. Myhre, Editor. No part of this publication may be reproduced without written consent.
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