GM Overcapacity Lurks in Shadows of UAW Strike
Consultant Alan Baum says even shutting down the Detroit-Hamtramck and Lordstown, OH, plants, which GM announced in November 2018 to bitter opposition by the UAW, won’t necessarily resolve the automaker’s overcapacity problem.
Any proposed settlement of the UAW strike against General Motors is likely to leave GM with a chronic overcapacity problem that could hobble its efforts to boost efficiency, which has run into a wave of union militancy.
“GM has more than 1 million units of excess capacity,” says Jeff Schuster, president-Americas Operations for LMC Automotive.
Eighty percent utilization or above is considered optimal. But GM assembly plants are running below that mark and some are sliding toward 50% to 60% utilization, driving up costs, he says.
Alan Baum of Baum Consulting in West Bloomfield, MI, says even shutting down the Detroit-Hamtramck and Lordstown, OH, plants, which GM announced in November 2018, won’t necessarily resolve the problem. The assembly line at the GM plant in Oshawa, ON, Canada, is slated to close for good in December.
However, GM probably has three more assembly plants – Fairfax, KS, Lansing Grand River in Lansing, MI, and Orion Assembly in Orion Township, MI – that are running well below capacity, given the automaker’s shift away from passenger cars, according to both Baum and Schuster.
But the strike and the course of negotiations indicate further consolidation of capacity is difficult, analysts note.