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Article States GM Has 1 Million Units Of Excess Production Capacity

5K views 55 replies 30 participants last post by  gkr778 
#1 ·
Wards Auto
September 27, 2019



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.








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#2 ·
But the strike and the course of negotiations indicate further consolidation of capacity is difficult, analysts note.
We have the new definition of "between a rock and a hard place". The length of the walk-out thus far seems to indicate that both sides feel they absolutely need a win. It will be interesting to see how thus turns out, and the up-coming effects on Ford and FCA.









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#6 ·
I don't know about GM specifically, but the global automotive industry overall in 2008 (year before GM's bankruptcy) had excess capacity of 34 million units according to research firm CSM Worldwide.
 
#5 ·
GM's overcapacity issue is their own doing. They import more vehicles then Ford and FCA, and their terrible marketing and chronic cost cutting cost them many sales.

It was only a few years ago Lordstown was humming along just fine. A homerun 2nd Gen Cruze would have helped save the plant but GM gave us more subpar product and allocated some production to Mexico.

This is a GM problem.
 
#7 · (Edited)
The problem is not over capacity, but under utilization of existing facilities.
If GM could manage to raise production even 10% at all of its assembly plants, there would be no over capacity to shout about.

The problem has been marketing. Deboral Wahl now fulfills a desperate need that GM has been hobbling along with. As the first CMO at GM since 2012, she definitely has her work cut out for her. However, selling a million more GM vehicles per year should be a cakewalk.

Rationale says that GM should be manufacturing 6 million vehicles a year in NA. Rick Wagoner was absolutely right when he stated GM should be selling 30% of the vehicles in the NA market. What went wrong?

Mary Barra's cut backs and repositioning of the company are threatening that ideal. GM used to be the biggest Detroit automaker. Now it's Number Three. Love the profits Mary, but it appears that new management is called for soon. The current situation is clearly unsustainable.
 
#8 ·
Break out the old 29 lapel pins?
 
#9 ·
This is the problem with these unions. They should have ZERO say in what product is built where. GM is a business, not a welfare program. These UAW members have essentially become welfare recipients now. It's funny how people complain about the bailout, but yet support the UAW with their efforts. That's so hypocritical. It's got to be one way or the other.
 
#12 ·
A job is not created for the worker, a job is created to fulfill a need for an employer. When I tell a pro-union person that, they go nuts. That's 100% the truth though. This is why I keep pushing people to get out of work that can easily be performed by a robot and learn something that an employer needs to pay a worker for. We have a local community college that just had a tax approved to build a new factory automation facility that will house programs that train workers to repair and maintain the machines that are increasingly taking these factory floor jobs. The writing is on the wall people!
 
#18 · (Edited)
Simple solution: Build where you sell.
Overcapacity is an automotive industry wide problem, as well as a global problem. For those reasons and more, "build where you sell" is not a solution. It's part of the problem.
 
#22 ·
Indeed. There's a simple solution to this, as old as the ages themselves. However old that is. If you're selling at a loss, increase sales, you will make it up on volume!:doh:

Overcapacity is an automotive industry wide problem, as well as a global problem. For those reasons and more, "build where you sell" is not a solution. It's part of the problem.
Why not start building windmills in those plants? Windmills and solar panels? :doh:

 
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#21 ·
Same old GM, They’re willing to let Colorado/Canyon 2nd place in sales cede to Ford Ranger because Barra is to cheap to update trucks and advertise them, also the craptacular interiors in the new trucks. Stealing development dollars from your best selling vehicles to pay for electric and autonomous vehicles is a recipe for disaster. Whose gonna buy cheap GM **** when they can go elsewhere for a superior product?
 
#23 ·
Maybe GM should try removing lots of the expensive tech that bumps up the price of the million excess cars, companies Dacia in Europe uses proven old reliable Renault tech (A bit like the Classic RAM that has helped steal the No2 best selling spot in the US offers very much stripped out bare bone basic cars that sell like hotcakes (You can pay extra for some gadgets if you want them, but you are not forced to have ones you dont want) .

Dacia stock can't keep up with meet the supply & demand in Europe their bare bone cars cheap as peanuts, Dacia Duster SUV hit the No2 sales best spot in Europe last month, Dacia brand had 2 cars in the EU top 10 last month and entered the European top 10 best selling brands for the first time ever last month, it looks like Europeans don't want to pay the extra for expensive gadget ridden cars anymore?


Bare bones basic Dacia Duster sales surge to No2 spot in Europe in August. LINK
 
#24 ·
Daewoo used to build previous-generation Opel/Vauxhalls and sell them at bargain basement prices - but then GM rebadged them as Chevrolet, increased the prices to mainstream level and the watched as the whole thing crumbled in front of their eyes.

GM doesn't have an over-capacity issue, it has an inability to design/build vehicles that customers want to buy.
 
#37 ·
Why is it unsustainable. She is doing what the board and stock holders want, Profit. Profit over sales is a good thing. She and the board are looking at the future and making sure at a turn down in the market they can stay alive. Its completely different than the old GM. However the Union and it seems die hard GM people don't understand any of this. I like to see more exciting cars too but the market for those are no longer there except in expensive sports cars. The C8 Corvette is one that should be playing in that area and it appears it will be. Until people embrace cars again you aren't going to see exciting cars.
 
#39 ·
Exactly my point as well, Ed! If you kill all the products, you have excess capacity. Somebody better put lead in Mary's golden parachute, or she's simply punting this down the road and shrinking GM.

RAM sales are now forecast to permanently exceed Silverado. Those trucks make money... Whither the CEO???

Not addressing the issues, and this is where I side with the UAW. Fix your s h i t, don't punt it down the road, and choose to not compete in so many still-viable segments. Mary needs to realize that GM still has a lot of sway, and use it. In the markets (retail and stock), with your workers, with your communities. It isn't dreaming big. You ARE big. Use that!
 
#40 ·
Maybe GM can bring back some production from overseas, there's no reason why the Envision can't be made in America. American companies can't continue shooting themselves in the foot.

Outsource production to China -> Chinese company makes copies -> American company acts surprised.

If you sent me the blueprints to make something for you because you are too cheap to pay your workers to build it, you bet I will make copies and undercut you. No honor among thieves, after all. You still from your workers, I steal from you.
 
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