GM Reduces Production at Six Plants in North America & Refocuses on Midsized Auto Market

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Researched by Industrial Info Resources (Sugar Land, Texas) -- General Motors Corporation (NYSE:GM ) (Detroit, Michigan) announced production cuts at six plants across North America on Wednesday, August 22, 2007, affecting its large sports utility and pickup truck markets. Beginning Monday, August 20, 2007, previously scheduled overtime production was eliminated at GM’s plants in Arlington, Texas, Janesville, Wisconsin, Fort Wayne, Indiana, Flint, Michigan, Oshawa, Ontario, and Silao, Mexico. These reductions in production, the depth of the production cuts was not specified, will remain in effect through at least the end of the year.

Click on the image at right to view a chart showing the breakdown of project spending by automaker in the U.S.

GM’s SUV and truck sales were down 9% in the first seven months of the year forcing the nation’s number one automaker to reevaluate its strategy of regaining lost profit margins through its larger vehicles. In addition to falling sales, high gas prices have been cited as a major reason for the change in production. However, these production cuts could also be used as a bargaining chip in the ongoing re-negotiation of GM’s contract with the UAW (United Auto Workers) union that began several weeks ago.

At the same time, GM dealers across the country are waiting with baited breath for the arrival of the new Malibu on the sales floors in November of this year. With the Big 3’s market share dropping below 50% for the first time in history earlier this summer, all three automakers are making an effort to refocus their energies on the midsized car market, one long dominated by the Toyota Camry and the Honda Accord.

The new Malibu and the revamped Accord, also scheduled to make its debut later this year, are signs that the automakers are ramping up competition in this key market area. The Malibu will feature more for less according to the previews and car buyers can expect stable if not falling prices mixed with healthy incentives to purchase as this new skirmish in the never ending war for the American market share enters a new phase this year.

If the Malibu debuts with ramped up sales figures, a new round of spending will likely be in order in the coming year as plants are retooled to produce additional midsized models in the near future. The same could well be true for the other automakers as well as the midsized market war heats up in the next year to 18 months.

Meanwhile, Chrysler LLC (Auburn Hills, MI) rolled the first of the next generation of minivan off its production line in Windsor, ON. This new minivan features a wider look and a second-row seat that swivels enabling passengers to sit on two sides of a table. The Windsor, ON plant recently completed a $511 million expansion to enable the new minivan to be produced for the 2008 model year.

The coming year should be very interesting for the entire North American automotive landscape. A new battlefront has been declared in the form of the midsized car and the realization that with gas prices the way they are the SUV and truck markets are not going to save them has finally sunk in at least with GM. The pivotal negotiations with the UAW are underway for not only GM but for Chrysler LLC and Ford Motor Company (NYSE:F ) (Dearborn, Michigan), as well, and the coming months will be very revealing as to what the future of the North American automotive industry will be and in what direction the Big 3 will focus their efforts as they try and regain the market share they have allowed to slip out of their grasp in the last several years.

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