Closure of the Detroit-Hamtramck and Lordstown, Ohio plants may not solve General Motors' overcapacity issue, analysts have said.
The two plants were included in a November 2018 announcement opposed by the United Auto Workers union whose members today began the third week of a strike against the automaker as talks on a new contract were set to continue. GM has offered 'most' affected workers new jobs in other plants but many would have had to relocate.
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Consultant Alan Baum of Baum Consulting in West Bloomfield, Michigan, told WardsAuto shutting the two factories wouldn't necessarily resolve the automaker's overcapacity problem.
Any proposed settlement of the UAW strike against GM was likely to leave the automaker with a chronic overcapacity problem that could drag on its efforts to boost efficiency, which has run into a wave of union militancy, the report said.
"GM has more than 1m units of excess capacity," Jeff Schuster, president-Americas operations for LMC Automotive, told WardsAuto noting 80% utilisation or above is considered optimal in the industry.
But GM assembly plants are running below that and some are slipping toward 50% to 60% utilisation, driving up costs, Schuster said.
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By GlobalDataMeanwhile, the GM plant in Oshawa, Ontario, Canada, is slated to close for good in December. In the meantime, the UAW strike across the border has affected parts supplies and shut the plant – temporarily – anyway.
Baum and Schuster told WardsAuto GM probably has three more assembly plants – Fairfax, Kansas, Lansing Grand River in Lansing, Michigan, and Orion Assembly in Orion Township, also in Michigan – which are running well below capacity, given the automaker's shift away from passenger cars.
But the strike and the course of negotiations indicate further consolidation of capacity is difficult, analysts noted.
The union views the offer as a starting point. "It's the floor, not the ceiling," UAW spokesman Brian Rothenberg toldWardsAuto.
The language over plant closings in any tentative agreement is still up in the air, officials from both GM and the UAW told WardsAuto privately.
The report noted Orion operates under a unique local agreement negotiated during GM's bankruptcy in 2009 that essentially allowed the automaker to turn over almost all the jobs not directly involved in assembling vehicles to outside contractors.
Such workers handling tasks such as delivering parts to the assembly line are union members but paid significantly less and GM has said a flexible model is one of only a few ways in which it can keep up with competition from transplants – the foreign-owned factories, mostly in the US south, which employ non-union workers.
WardsAuto said, in the case of Lansing Grand River, internal union politics play a major role. The chairman of the UAW-GM bargaining team, Ted Krumm, comes from UAW Local 652, which represents 1,700 workers at the plant. The scandal surrounding the misuse of joint training funds has taken a major toll on the UAW's top leadership and Krumm has taken a larger role in the negotiations, stepping forward to offer the reasons for the strike after a 15 September meeting of the UAW-GM Council. The council also now has the authority to decide if the strike will end before ratification of the tentative agreement or after an affirmative vote, which has been the union's past practice, the report said.
Schuster told WardsAuto GM could spread the cutbacks geographically by shutting down capacity in Canada and Mexico. But after a strike two years ago, GM told Unifor, the union representing its Canadian workers, it would keep open a plant in Ingersoll, Ontario, at least two more years.
Despite rumours in Mexico that GM's Ramos Arizpe plant could be axed in future, the plant is now building the new Chevrolet Blazer over strenuous objections of the UAW.
WardsAuto said the fate of Lordstown is not sealed for union members who have kept alive the idea the plant could build a new vehicle.
The report noted the UAW has not signed off on a deal proposed by GM chairman Mary Barra and president Donald Trump that would turn the plant over to a startup company called Workhorse, which has proposed building electric postal vehicles in the plant.
Workhorse has yet to win the contract and the UAW remains deeply sceptical of the proposal, Harley Shaiken, a labour expert from the University of California-Berkeley, told WardsAuto.
The report said there was sentiment within UAW ranks any tentative contract should be voted down unless GM proposes to save Lordstown. The GM proposal for a new battery plant somewhere in the Lordstown area would involve a joint venture with another company and lower starting wages, the report noted.
WardsAuto also noted the union made clear during its bargaining convention earlier this year that it wanted to be in at the start of the industry's shift toward electrification and is certain to make that an issue in upcoming bargaining at Ford and Fiat Chrysler.
