GM Weighs Closing Three Plants
Under Plan to Reduce Capacity
By LEE HAWKINS JR.
Staff Reporter of THE WALL STREET JOURNAL
November 21, 2005; Page A3
General Motors Corp. could close at least three North American assembly plants and additional support facilities such as metal-stamping plants when it announces a plan to cut excess capacity in its home market, people who have studied the company's operations say.
GM Chairman and Chief Executive Rick Wagoner has promised to unveil a plan before year's end to bring GM's capacity in line with North American sales by 2008, and an announcement could come as early as today. Detroit-based GM and United Auto Workers officials have been negotiating the specifics of the plans and how they will affect thousands of workers.
GM's plant-shutdown announcement, when it comes, will be another blow to the UAW, which now faces the loss of tens of thousands of jobs at GM, Ford Motor Co. and the two U.S. auto giants' respective former parts units, Delphi Corp. and Visteon Corp.
While the details of GM's plans remain unclear, GM officials have said that their long-term strategy is to shift more production to lower-cost locations outside North America and to make plants that remain in the U.S. more efficient and flexible, able to build more than one model.
Earlier this year, GM said it might soon discontinue at least one shift at plants in Spring Hill, Tenn., which make the Saturn Ion and the Saturn Vue, and in Oklahoma City, which produces the Chevrolet Trailblazer, Buick Rainier and the GMC Envoy. The company is considering moving the Saturn Ion production from Spring Hill to a GM plant in Lordstown, Ohio, but union leaders in Spring Hill believe the work will stay in Spring Hill. Some analysts also speculate GM could close a large sport-utility plant in Janesville, Wis.
But Mr. Wagoner warned in a recent interview that simply because a plant is underutilized now doesn't mean it will close. "It's much more complex than [looking at underutilized plants]. It ranges from future product plans to age of the facilities and capabilities of the facilities," Mr. Wagoner said. In addition, "it's got to do in some cases with the age of the work force and things of that sort."
Once Mr. Wagoner makes his capacity plan public, he will have to convince Wall Street -- and investor Kirk Kerkorian, who owns 9.9% of GM's shares -- that the restructuring goes far enough to return GM's core home-market auto operations to sustainable profitability. GM has posted losses exceeding $3 billion so far this year, most of them accrued in North America.
The plant closings aren't expected to be final until after the current UAW contract expires in 2007, because the contract forbids GM from officially closing a whole plant. GM can idle facilities under the pact. But idled UAW workers will continue to receive close to full wages.
GM's plants on average currently run at about 85% of their capacity, according to the company. Consulting firm CSM Worldwide estimates GM's capacity utilization is lower, at about 82%. GM sells more than 20% of its U.S. cars to fleets. Some analysts argue that if GM reduced low-profit bulk sales to rental fleets and cut reduced-rate sales to employees, GM could close many more than three plants.
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