It's hardly unexpected given recent gloomy sales numbers, but General Motors announced today that they will be cutting shifts at several North American plants. Unfortunately, nearly 2,000 workers will lose their jobs in the process as GM eliminates its third shift to slow production and ease the backlog of vehicles sitting on dealer lots. The affected plants are Orion, Michigan; Oshawa, Ontario; and Lordstown, Ohio (these plants manufacture the Chevrolet Malibu, Pontiac G6, Chevrolet Impala, Chevrolet Cobalt, and Pontiac G5). The news comes on top of the previously announced idling of the Fairfax assembly plant in Kansas City mid-January. That plant makes the Saturn Aura and also the Chevrolet Malibu.
It's been more than a decade since the "recession-proof" Chevrolet Corvette had to endure a production cut due to excess dealer inventory, but that's apparently the case once again. Citing slow sales related to the ongoing automotive recession, GM will turn off the Corvette's factory lights during the week of October 6th. When Vette assembly resumes the following week, production will be scaled back to 15 cars per hour (normal speed is 18.5 cars per hour). Unfortunately, GM says layoffs will accompany the new schedule at the Bowling Green facility, with up to 75 workers losing their jobs. While surprising, the news isn't entirely unexpected. Corvette sales were down 8.5 percent for the year through August of 2008. They only rebounded after GM included the model in its employee pricing sale... and we all know a shot in the arm like that won't hold out over time.
May was apparently a tough month for Ford's big SUVs. With consumer demand understandably cold for the gargantuan utes and their hard-to-swallow 12 mpg city ratings, Lincoln Navigator sales slid 37 percent while Ford Expedition sales were down 43 percent. As a result, Ford Motor Company has announced that its Wayne, Michigan, plant that assembles these vehicles will close down for nine weeks starting on Monday. While the plant sits idle, Ford will increase production of its passenger cars to better meet market demand for smaller and much more fuel efficient vehicles.
The strike last week by the International Brotherhood of Teamsters (IBT) against Performance Transportation Services (PTS) was the straw that broke the camel's back. The second largest car hauler in the United States was unable to survive the wage-related dispute, especially after filing for bankruptcy protection in 2006 and 2007. On Friday, PTS announced that it's stopping all operations and going out of business.
The effect on the industry overall will be minor. Automakers began rescheduled their deliveries last week when the strike was announced. As domestic vehicle production has slowed, excess transport capacity has been able to take up the slack and no major interruptions have been seen. It seems the striking workers have also been accommodated as the Teamsters are reporting that the "vast majority" of their 1,250 drivers have found work at other unionized locations. Still, any organized union thinking of striking in this economic climate should consider the possibility that such a move may result in pink slips for everyone.
Detroit's Big 3 American automakers account for roughly half of new car sales in the United States. So how do you explain that they hold almost two-thirds of all the new car dealerships in the country between them? The automakers themselves recognize the problem, and have been closing dealerships faster than you can say "foreign competition".
The Automotive News Dealer Census shows that, as of the start of this year, GM, Ford and Chrysler had 14,199 dealerships across the United States, 621 fewer than at the start of last year. The closures reflect a growing trend of reduction in the number of dealerships and franchises. Today U.S. carmakers have nearly 5,000 domestic dealerships fewer than they did in 1980. The closings began in earnest five years ago when the Big 3 closed 256 outlets in 2003. Of the 513 dealerships that closed last year in the United States, 484 were for American automakers. While GM continues to lead with the most outlets in the country, it closed 238 dealerships and 227 franchises itself last year. Ford closed 214, while Chrysler closed 164. Both GM and Chrysler are also campaigning for its dealerships to consolidate between brands: The General is aiming to combine Pontiac, Buick and GMC into single dealerships, with luxury dealerships focusing on Cadillac, Saab and HUMMER, while Chrysler LLC is undertaking Project Genesis to consolidate Chrysler, Dodge and Jeep franchises into single outlets.
