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Today, General Motors announced plans to consolidate full-frame capacity across its North American operations, resulting in the planned closure of three assembly plants, including Oshawa Truck in September 2009, Janesville in 4Q 2009 and Moraine in 2Q 2010, while impacting a fourth operation in Toluca, Mexico, where output of the Chevrolet Kodiak will cease at the end of 2008. These actions are largely net volume neutral and are consistent with the current May 2008 North American light vehicle production forecast. One exception involves the closure of Oshawa Truck in place of the forecasted closure of Pontiac East in 2Q 2010. As a result, upon closure in September 2009, output from Oshawa Truck is now expected to be reallocated primarily to Pontiac East and other operations will also benefit, yet to a lesser degree. Persistent weakness in the housing market and surging fuel prices have resulted in sharply lower demand for full-size pickups and SUVs. This situation is exacerbated further as a growing number of lifestyle pickup and SUV buyers have taken steps to downsize, flooding the used vehicle markets, resulting in sharply lower residual values. Reduced commercial demand at the retail level is further squeezed as an increased supply of used pickups and SUVs translates to improved affordability for contractors and fleet operators shopping the used vehicle market. Despite a recent resolution to the UAW strike at American Axle & Manufacturing, weak demand does not guarantee a return to historic production levels as inventories remain high and consumers seek more fuel-efficient alternatives. Ending output of mid-size and full-size SUVs at Moraine and Janesville was also predicated on market demand, representing some risk for an earlier end of production if necessary as demand will be affected by ongoing fuel price volatility.
Further actions involve the addition of a third production shift at GM’s Lordstown and Orion assembly plants in September 2008, which are currently operating with significant daily and weekend overtime. The implementation of a three-shift work pattern is expected to result in a more stable production schedule, allowing for reduced line rates and again results in a volume neutral impact. GM further confirmed that the Chevy Volt is approved for production and is expected to be sourced at its Detroit Hamtramck facility in late 2010.
With fuel prices above $4.00 per gallon, consumers are increasingly open to smaller, more fuel-efficient vehicles. GM, Ford and Chrysler have historically generated a disproportionate share of profit from full-frame trucks and now face severe headwinds until more global fuel-efficient entries account for a larger share of overall output at the respective companies.
Revised Production Forecasts
For questions, please contact:
Joe Langley,
Senior Analyst, North American Vehicle Forecasts
at joelangley@csmauto.com or +1 248 465 2832
Mike Jackson,
Director, North American Vehicle Forecasts
at mikejackson@csmauto.com or +1 248 465 2833
