Blog: Dave LeggettLordstown, economics and GM's survival chances

Dave Leggett | 19 August 2009

There's some good news for GM's Lordstown, Ohio, facility with GM's announcement of additional production for the next two quarters.

Co-incidentally, I came across something on the BBC's website which neatly brings together some aspects of the talk of 'economic recovery' and puts it in a broader perspective by looking at issues surrounding GM's Lordstown plant, with some human interest helpfully thrown in for once (real people do make cars and car parts, after all - they're not just numbers in a spreedsheet).

If national economies are, technically speaking, off bottom and growing again (the statisticians at places like the IMF have been getting rather excited about that this week) that is a good thing, naturally. But the pain being endured in parts of the Western world's economy - especially manufacturing - really is a bit more serious than a few tenths of a percentage point of GDP growth can sort out. 

The carnage caused to company and household balance sheets hasn't gone away - there are still some big question-marks over the sustainability of this inventory cycle-led upturn. Inflation and higher interest rates are among the possible party poopers next year (and in some automotive markets, there will be additional headwinds caused by scrappage incentives payback). And there are still structural changes to contend with above and beyond the impact of the recession. How's GM looking versus Toyota? Strategically, there's much to do.

And yes, GM does need its Cruze - which replace the Cobalt - to do very well. 'Cash for Clunkers' is helping to lift the US market now, like scrappage schemes elsewhere, but in five years' time GM will be around in something like its current form only if it has managed to deliver the product in North America that people will actually buy.

The good news on short-term production schedules being raised is indeed good and we have had a shortage of that over the last ten months, so those who would like to see GM survive in the long-run should welcome it. But they should also not get too carried away.

US: GM ups NA production and expects 1,350 new hires

BBC News: Will the Chevrolet Cruze save GM?


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