GM Breaks with Tradition, Cancels Summer Maintenance to Boost Production

---

Researched by Industrial Info Resources (Sugar Land, Texas)--Just over a year ago, General Motors Corporation (Detroit, Michigan) faced some very difficult decisions. Sales were almost nonexistent, and the automaker was posting ever-larger losses as each quarter passed. A history of very poor management decisions had caught up to the manufacturing giant, forcing the company to either beg the government for a bailout or enter bankruptcy. As it turned out, GM did both, first taking $50 billion in government aid, and then ending up in bankruptcy proceedings anyway as a simple infusion of cash could not solve the management problems.

However, after a year of reorganization, re-evaluation and drastic cost cutting, GM has seen its position do a complete 180-degree turn, and the future once again looks bright. So bright, in fact, that GM has announced that it will be canceling the company's traditional summer maintenance shutdowns at nine of its 11 United States assembly plants to boost production by 56,000 vehicles to meet significantly increased demand.

Typically, like clockwork, GM, as well as all of the other North American automakers, take their assembly and other production plants down for maintenance each summer. This maintenance period can last from seven to 14 days and typically takes place through the July 4 holiday period. This year, GM had intended to shut down plants from June 28 to July 9. However, with the additional demand coming into play, this will not occur this year.

GM will continue with plans for the other traditional maintenance shutdown period during the Christmas and New Year's holidays. This shutdown period will be virtually assured to occur thanks to the automaker's forgoing the summer shutdowns. Automotive production plants, especially assembly plants, require a steady diet of maintenance to operate efficiently. While some maintenance can be performed as needed throughout the year, major shutdowns are required to handle the larger maintenance projects. In addition, the automakers typically use the summer shutdown period to perform whatever changes are necessary for model changeovers.

This will be the second year in a row there will have been unusual summer maintenance schedules. During the summer of 2009, many automakers extended their traditional maintenance periods to reduce production, as the market had taken a dive and sales dictated less production was necessary. With automotive sales booming this spring and summer, the opposite is obviously the case this year. GM's sales rose 15% during the first five months of 2010 compared to the same period last year.

While other automakers are not anticipating following GM's lead in cutting back on maintenance downtime, the option still exists if they wish to boost production slightly at the expense of model changeovers and the delay of major maintenance. As sales continue to improve across the board, we may see similar moves contemplated for the winter shutdown period, although that would be difficult for GM to accomplish since the company has skipped summer maintenance.

Overall, this is a very good sign for the U.S. automotive sector. If GM is confident enough to disrupt the summer shutdown schedule to boost production, the company must be expecting sales to continue to increase at a good pace. GM0 has been reaching recovery milestones almost monthly this year and is hoping to be in a position to re-introduce the GM stock symbol to Wall Street later this year. GM is hoping the money gained by the impending initial public offering will provide the necessary funds to pay back the majority, if not all, of its outstanding $50 billion in bailout aid to the U.S. and Canadian governments. If GM can pull off the repayment and maintain its recent history of more solid management decisions, the automaker could be right back in the hunt for the No. 1 position in worldwide sales by 2011.

Industrial Info Resources (IIR) is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. IIR's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.