Archive for Friday, April 24, 2009

GM’s lengthy plant closures will result in ripple effect

April 24, 2009


— General Motors’ decision to shut down 13 assembly plants for up to 11 weeks this summer will disrupt far more than the lives of nearly 24,000 workers, rippling out to damage part suppliers, local businesses and state economies.

The Detroit automaker had little choice. GM, surviving on $13.4 billion in federal loans, must steady itself, slash costs and align production levels with the shrunken demand if it wants to live much longer. The announcement Thursday comes as GM races the government’s June 1 deadline to squeeze deeper concessions from bondholders and the United Auto Workers union.

The decision is expected to lead to thousands more layoffs and temporary factory closures as GM works out its schedules for engine, transmission and parts stamping factories.

That’s bad news for Lordstown, Ohio, where GM operates side-by-side assembly and stamping plants, which account for about 70 percent of the village’s annual $4 million municipal budget, Mayor Michael Chaffee said. Suppliers and spin-off businesses add another 5 percent in the community of 3,800.

The Lordstown assembly plant, which makes Chevrolet Cobalt and Pontiac G5 compacts, is slated to shut down for five weeks starting June 1. GM didn’t disclose shutdown details about stamping and powertrain plants, but it stands to reason their parts won’t be needed if so many assembly plants stop making cars.

“Any shutdown short- and long-term is of concern both from the standpoint of dollars flowing into the community but also the psychological effect that it has both locally and nationally upon folks,” said Walter Good, a vice president at the Youngstown-Warren Regional Chamber.

In Parma, Ohio, Cleveland’s biggest suburb, the GM stamping plant has about 1,200 employees and represents 8 percent of the city’s income tax revenue.

“It’s our largest taxpayer and there are a number of smaller businesses that feed off of or supply parts to or work with General Motors,” Mayor Dean DePiero said. “It’s an important part of our fabric.”

The GM work force helps support convenience stores, service stations, bars and restaurants, the mayor said. “That trickles down into many aspects of our local economy so business owners may take a hit. It’s not just about those employees or that plant.”

GM said the shutdowns will help control high dealer inventories and bring production in line with sales. The company plans to cut production by 190,000 vehicles.

The carmaker’s sales fell 49 percent in the first three months of this year as U.S. auto sales fell to a 27-year low.

Not even deep discounts, White House-backed warranties, and a program that covers laid-off buyers’ payments seem to be helping GM sell more vehicles. Although it’s still the nation’s largest automaker in terms of market share, GM has more than a six-month supply of several models stacking up on its lots, including the Pontiac G5 compact and Chevrolet Silverado hybrid pickup truck.

Automakers and analysts expect sales to improve in the second half of the year as the economy and consumer confidence recovers, and government stimulus programs take effect. GM North America President Troy Clarke said the company isn’t making the cuts because it sees sales worsening beyond current projections.


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