GM Drops the Other Shoe : 7 More Plants Employing 18,000 Get Word on Closure
Nearly a year after announcing plans for a massive retrenchment, General Motors Corp. on Thursday identified the remaining seven of the 21 plants it plans to close by mid-decade as it struggles to stem huge losses in its North American car operations.
But the long-awaited move, which will eliminate up to 18,000 jobs, may not be the final spasm in the world’s largest auto maker’s painful contraction. GM said Thursday that two additional plants are likely to close, bringing the total to 23. And a separate announcement outlining a new direction for the company’s massive parts-making business signaled that more layoffs and plant closings may be on the horizon.
The auto maker--still the world’s largest industrial corporation despite its dwindling presence in the U.S. market--said it will close the Wilmington, Del., assembly plant that builds Chevrolet Corsicas and Berettas, and shutter parts-making plants in Livonia and Kalamazoo, Mich.; Syracuse, N.Y.; Euclid, Ohio; Trenton, N.J., and Sioux City, Iowa.
In addition, GM said its Flint, Mich., truck assembly plant has been assigned no future vehicle production after the 1995 model year and will probably be closed. The company will also put its parts-making plant in St. Catharines, Ontario, Canada, up for sale and will close it if no buyer is found.
That would bring the total number of plants GM has earmarked for closure to 23, exceeding the target of 21 announced last year.
“With these actions, we now have a plan in place to reach our production capacity goal of 5.4 million units by the mid-1990s, which we believe to be in line with market demand for our products,” GM Chief Executive John F. Smith Jr. said.
Last year, GM had the capacity to build about 6.7 million cars and trucks but sold only 4.5 million.
For GM workers, who have spent nearly a year wondering which plants would be closed as the company comes to grips with a dramatic market share slide over the last decade, the grim news came as something of a relief.
GM management told the United Auto Workers last December that it planned to close 21 plants and eliminate 54,000 union jobs by mid-decade, goals which Thursday’s actions appeared to achieve. The company had already announced the other 14 plant closings.
But GM spokeswoman Karen Hulsey said it would “not be appropriate” to say that Thursday’s action would be the last plant-closing move in the near future.
That is in part because GM’s $24-billion components group, which makes everything from spark plugs to transmissions, said Thursday that it is seeking to sell or eliminate 14% of its product lines in an effort to focus on areas which offer the most opportunity for global expansion.
The auto maker’s high-cost parts operations have been blamed for the fact that GM vehicles cost an average of $800 more to produce than those made by rival Ford Motor Co. And while the company’s parts plants have been scrambling to improve productivity and cut costs in recent months, analysts say it makes more sense for GM to simply shed much of its parts-making capacity.
“The key is not plant closings,” said Ronald Glantz, who follows the auto industry for Dean Witter Reynolds in San Francisco. “What’s key is that new management has said, ‘We can’t buy axles from (our internal parts division) when we can get them from independent suppliers for much less.’ That’s the genuine savings.”
That’s a lesson that Tom Martin, bargaining chairman for the UAW local at GM’s Syracuse, N.Y., plant learned all too well Thursday morning when he was told that the plastic parts-making factory would be closed and its 1,300 employees laid off late next year.
“There’s some hard feelings here, because we did a lot of things working with management to make this plant competitive,” Martin said. “But our product lines just weren’t competitive. Our wages and benefits come to $34 an hour, and we just couldn’t compete against either the domestic or the Mexican competition.”
Another GM spokeswoman, Karen Healy, said the streamlining of GM’s parts operations could lead to additional parts plant closures in addition to the six announced Thursday. For example, GM’s Saginaw division told its employees Thursday that it would try to sell seven of its plants. If it cannot find a buyer, two of the plants could be closed.
Analysts said GM’s need to reduce its parts-making capacity comes down to the same reason the company lost a staggering $15 billion in its North American vehicle operations since 1990: unpopular cars and trucks.
“This company is not going to make it on cost reduction and it’s not going to make it on capacity reduction,” said Maryann Keller, auto analyst at Furman Selz. “Right now what GM has to do is figure out what you and I want to buy. Only then will we have seen the last of these plant closings.”
RISE IN CAR SALES
Domestic auto makers reported a 22.9% rise in vehicle sales in late November. D3
