GM Walkouts Threatening Introduction of Truck Line
The strikes hobbling General Motors Corp. are now threatening to disrupt the debut this fall of its most important vehicle: the 1999 Chevrolet Silverado full-size pickup truck.
The labor disruptions come just as GM is beginning initial production of the Silverado and sister GMC Sierra. The new pickups replace the venerable C/K pickups that have long been among GM’s most popular and profitable trucks.
The Silverado is the foundation for GM’s next generation of sport-utility vehicles, including the Chevy Tahoe, GMC Yukon and Denali, Cadillac Escalade and full-size Suburban. So a delay in the pickups’ introduction could reverberate into other future vehicle launches.
With the redesigned vehicles, GM was hoping to unseat the Ford F-Series as the biggest selling vehicle in America, a title the Dearborn rival has held since 1982.
“This is arguably GM’s most important product launch of this decade,” said Wesley Brown, analyst for Nextrend, an auto consulting firm in Thousand Oaks.
The United Auto Workers’ walkouts, which enter their 26th day today, have not stopped initial production of the new models--the first major redesign in 11 years--but have shut down the building of the hot-selling older versions.
GM executives vow the labor problems will not interfere with the Silverado’s launch, but analysts say the longer the picket lines are up, the more likely the showroom unveiling will be delayed.
“If the strikes last into August, the launch of the pickups could be set back,” said Michael Robinet, an analyst with CSM Forecasting in Southfield, Mich.
GM spokesman Gerald Holmes refused to speculate on how long the strikes would have to last before production would halt. “There has been no impact so far,” he said. “Obviously at some point there would be.”
The strikes at two parts plants have had a domino effect on GM, shuttering 26 of 29 assembly plants and forcing layoffs of about 163,000 hourly workers. Two other plants were idled Monday due to the beginning of GM’s scheduled two-week vacation shutdown when factories typically are prepared for production of new models. One of the plants to be idled Monday as part of the scheduled shut down was the Oshawa, Ontario, plant where initial production of the Silverado began three weeks ago. The factory is in a start-up mode, making less than 100 vehicles a day, and is not expected to reach full production until sometime this fall.
Meanwhile, talks continued Monday in Flint, Mich., with no report of progress. However, for the first time in two weeks, top-level GM and UAW negotiators were at the table, giving some hope that a compromise was possible. The dispute, which has cost GM $1 billion in profits, revolves around job security and plant efficiency.
It is still too early to determine whether the strikes will cause a significant delay to the Silverado’s launch, which will be accompanied by a multimillion-dollar advertising and marketing blitz, analysts said.
The full-size pickup is GM’s highest volume vehicle. It sold nearly 700,000 Chevy/GMC models last year and targeted sales of 900,000 for next year. The vehicle is also one of GM’s most profitable, bringing in about $5,000 in earnings per unit.
“It accounts for a quarter to a third of the company’s profits,” estimates David Healy, an analyst with Burnham Securities.
The profits could be even higher for the new vehicle since the Silverado requires 20% fewer parts and is easier to assemble than its predecessor. The new trucks are conservatively styled with a lighter but stronger frame, roomier cabin and smaller, more powerful engine.
The Silverado launch is being carefully planned to avoid problems that have plagued other recent GM model introductions. Slow launches have contributed to high costs and lost sales.
GM plans staggered production of the new vehicle at three different plants, while continuing to make the C/K through this year as both 1998 and 1999 models. By continuing to make the older design, GM hopes to avoid an inventory shortage that could cost it tens of thousands of dollars in vehicle sales.
The new pickups have played a part in the current strikes. GM was so concerned that UAW strikes would disrupt the Silverado launch that it secretly removed from a Flint stamping plant dies used to form sheet-metal for the pickup in late May. The move infuriated the UAW, which just days later sent 3,400 workers to the picket lines.
GM has since agreed to return the equipment to the Flint plant once the strike is settled.