Discussions with the UAW have started. Entire plants at risk.
GM is getting whacked harder than any of the major automakers by the industry-wide plunge in car sales, as Americans switch in ever larger numbers from cars to “trucks,” which include pickups, van, SUVs and crossovers. In the first half of 2017, GM’s car sales in the US plunged 19%, and in June 38%.
The rest of the industry (without GM) booked declines in car sales of “only” 10% in the first half and 9% in June.
GM is losing ground in the bitter industry-wide reality of dropping car sales. Inventory is piling up on GM dealer lots. At the end of June, some car models exceeded a catastrophic 180 days’ supply. GM has already cut production. There have been layoffs. Plants have been temporarily shut down, and entire shifts have been eliminated. But it hasn’t been enough.
Now comes the next step: Ending production entirely of some models, shuttering plants for good or converting them to making trucks, and fretting about jobs. And that’s already being discussed between the UAW and GM, according to UAW president Dennis Williams.
“We are talking to [GM] right now about the products that they currently have” at underutilized car plants, such as Hamtramck in Michigan and Lordstown in Ohio, and whether these models could be replaced with more popular vehicles such as crossovers, he told reporters today, including Reuters. “We are tracking it,” he said. “We are addressing it”
Six passenger cars are currently under review at GM and might be cancelled after the 2020 model year, Reuters “has learned from people familiar with the plans”: Chevrolet Volt (a hybrid, not to be confused with the Bolt, an EV), Buick LaCrosse, Cadillac CT6, Cadillac XTS, Chevrolet Impala, and Chevrolet Sonic.
GM has already done away with the Cadillac ELR, a dressed-up 2-door luxury coupe version of the Volt, but a lot more expensive. Practically no one had bought it. But that was just a failed niche product. Some of the six models GM is thinking of canceling were its bread-and-butter.
Other automakers already cancelled cars for the 2016 and 2017 model years, including the Dodge Viper; the Volkswagen Eos, a convertible suffering from the decade-long slump of all convertibles; the Honda CR-Z hybrid 2-door; the Lincoln MKS, a nicely groomed Taurus; and Toyota’s entire Scion brand, with some models migrating to the Toyota brand and others, such as the Scion tC, just gone.
Oh, and then there’s Fiat Chrysler. It has wound down production of the Dodge Dart (Fiat comes to mind) and the Chrysler 200. It no longer makes cars at all in the US. The remaining cars it sells in the US will be made in Mexico, Canada, and other countries. It will only make trucks in the US, which are a lot more profitable, such as the Ram and the Jeep-branded SUVs.
But cancelling six cars, including bread-and-butter models, as GM is doing, is a sign that the collapse of car sales in the US isn’t just a temporary hiccup.
GM’s Hamtramck plant in Detroit, which builds Chevrolet Volt, Buick LaCrosse, Cadillac CT6, Chevrolet Impala – all four them in the list above of cars potentially on the chopping block – is a sitting duck. Reuters:
In the first half, it built fewer than 35,000 cars, down 32% from the same period in 2016, according to suppliers familiar with GM’s U.S. production schedule. The typical GM assembly plant builds 200,000-300,000 vehicles a year.
Rental car companies, which are the biggest car buyers out there, have found themselves over-fleeted due to industry changes, including the surging use of rideshare services even by business travelers [Answers Emerge: This is How Badly Uber Eats into Hertz]. And so rental car companies are trimming their purchases. Which leaves automakers with less of an outlet for their cars.
And even consumers that typically bought cars are more and more gravitating toward SUVs and crossovers, and even pickups, as Honda’s successful launch of its Ridgeline pickup trucks amply demonstrates. And as long as gas is below $3 a gallon, that’s unlikely to change. Gas might have to go over $6 a gallon and stay there before there would be a noticeable rejiggering of buying preferences. And even then it might not happen.
Now that Carmageddon has descended upon cars, and particularly on GM’s cars, the company would need to perform a miracle and come out with hot new cars that people would actually want to buy, even with gas below $3 a gallon. But miracles are rare these days, especially in the car business, and so the inevitable next steps will impact in dramatic ways the model lineup, plants, and jobs – not only at GM but also at its suppliers.
American icon Harley-Davidson is in an even tighter spot, trying to manage a structural decline in a terrible industry. Read… Harley-Davidson Spirals Down, Announces US Layoffs, Builds Factory in Thailand
Enjoy reading WOLF STREET and want to support it? Using ad blockers – I totally get why – but want to support the site? You can donate. I appreciate it immensely. Click on the beer and iced-tea mug to find out how:
Would you like to be notified via email when WOLF STREET publishes a new article? Sign up here.