General Motors Corp., faced with shrinking North American market share and evaporating profits, may have no choice but to close more plants and lay off thousands more workers, according to the Detroit News.
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Analysis by the motor city newspaper showed that, in the past 16 months, GM has been forced to shut down various North American assembly plants for 121 weeks because of slow sales and bloated inventories.
The Detroit News said GM this week alone temporarily laid off 7,000 workers, joining an estimated 8,500 workers already idled due previous plant closings or permanent production cuts – by contract, GM must pay the workers 95% of their pay.
The report said GM has closed eight plants in North America and shed more than 127,000 factory jobs since 1992 but analysts still predict GM will be forced to close more assembly and parts plants over the next few years.
The analysts reportedly say the problem is that GM’s current North American plants have enough capacity to support 30% of the market but GM’s US market share has dropped to 25.6%.
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By GlobalDataIn addition, despite cutting car production in half since 1993, the automaker is still saddled with too many plants that build sedans and coupes, the Detroit News said.
During the first quarter, GM’s assembly plants produced 87.6% of the vehicles they’re capable of building, compared with 90.2% during the first three months of 2004, the report said, adding that consultants IRN Inc. estimates GM uses just 80% of its production capacity.
“In a market that’s so price competitive where the (profit) margins are starting to erode, we could argue they should be up around 90 percent,” IRN senior analyst Erich Merkle told the Detroit News.
