ARLINGTON — Even at lunch, the clang of tools echoes through the General Motors Assembly Plant in Arlington.
While workers sit down to sandwiches, the break provides a slim window for maintenance on the plant’s sophisticated equipment, which runs 120 hours a week or more. About 200 skilled-trades people at the plant are available to make repairs and perform maintenance.
And with gas prices low and demand high for the full-size SUVs that Arlington builds, the line will continue to clatter around the clock.
The plant — GM’s only factory for full-size SUVs — added a third shift last year and typically works two Saturdays a month of overtime as well.
In addition, all three presses at the plant’s new stamping facility are up and running now, punching out fenders, doors and other metal body panels.
“We look at what can you do at lunchtime,” plant manager Paul Graham said. “Is there some small task that can be taken care of in 30 minutes?”
With all of its stars aligned, the Arlington plant is engaging in some heavy “capacity utilization.” What that means is a certain volume of vehicles covers the factory’s overhead costs.
If the plant can build more than that number, profits rise dramatically, said George Hoffer, a business professor at the University of Richmond and longtime observer of the U.S. auto industry.
This is the time to crank it up, Hoffer said.
“In the short term, the more trucks you put on the line, the more you lower your fixed costs,” he said.
GM’s restyled 2015 SUVs have generated double-digit sales increases most months since their introduction.
Through October, sales of the factory’s three main vehicles — the Chevrolet Tahoe, GMC Yukon and Cadillac Escalade — had increased 16 percent, 53.5 percent and 50.6 percent respectively over the same period last year.
The highly profitable vehicles also hold a commanding 76 percent share of the full-size SUV segment.
Moreover, the average price of luxury SUVs like the Cadillac Escalade and some models of the Yukon was a fat $77,822 through the first 10 months of the year, a 19 percent increase since 2009, according to Edmunds.com.
“I drive the product,” Graham said. “I like the way it looks and drives, and it’s fresh. I’m not surprised that it’s selling well.”
Six months ago, workers at the plant were assembling about 1,200 SUVs a day worth an estimated $48 million in revenue to GM.
Although Graham declined to discuss specific production numbers, he acknowledged that the volume is up “some” from last year.
Through October, for example, production of the Chevrolet Tahoe — Arlington’s top-selling vehicle — had increased 18 percent from the same time last year, according to Automotive News.
Workers also built 21.6 percent more Yukons and 24.2 percent more Escalades during that period, Automotive News said.
Some of the build numbers increased because they’re compared with last year’s numbers when the plant was completing its retooling for the new SUVs, slowing production.
But demand for SUVs continues to grow.
The factory also supplies full-size SUVs for markets in the Middle East, South America and Europe. “They are a significant portion of our volume,” Graham said.
The plant also produces about 10 commercial and police vehicles a day.
Even before Arlington added a third shift, it earned healthy profits for GM.
“By adding the third shift, GM has probably lowered its fixed costs per unit at the Arlington plant by more than 20 percent,” Hoffer said. “Those savings go right to the bottom line.”
A three-shift plant running overtime can also ease the need for a second plant — a major consideration since a new plant would cost more than $1 billion.
For years, GM had two factories building full-size SUVs.
But in 2008, after inflated gas prices and a widening recession decimated big SUV sales, GM closed its SUV factory in Janesville, Wis., leaving Arlington as the only plant building the big trucks.
With three shifts and Saturday overtime, the plant is on pace to build 300,000 SUVs this year.
“At this point, with [SUV] sales affected by fuel prices, they don’t want to commit to an additional plant,” Hoffer said. “It makes more sense to crank up production at Arlington and go for the bottom line today.”
That approach can be risky in the long term because three shifts tax the plant’s equipment, which is turning out an average of 50 SUVs an hour. But Graham said tired equipment has not been a problem so far.
“We’ve been on three shifts for more than a year and are not seeing any big issues,” he said. “We try to stay on top of it.”
There could also be issues with tired workers.
Some of the plant’s 4,200 workers enjoy the constant overtime — which has been scheduled for the last several years — and some don’t, Graham said.
“It just depends on their situation. But I think everyone would prefer this to being slow.” Union officials didn’t return calls for comment.
Kelley Blue Book analyst Tim Fleming doesn’t see any ebbing of demand for GM’s full-size SUVs over the next couple of quarters.
“Right now, GM is in a really great spot,” he said. “They’ve got great product. They have no real competition. And they make a lot of money off those trucks.”
The full-size SUV segment hasn’t fully recovered from the traumas of 2008, when sales dropped more than 50 percent, but sales have begun to grow slowly.
“Full-size SUVs accounted for 4 percent of all new-vehicle sales at one time,” Fleming said. “That dropped down to 1.5 percent in 2010, but it has bounced back some.”
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