GM to Close Four Assembly Plants; Future of 10,000 Hourly Employees in Limbo

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Researched by Industrial Info Resources (Sugar Land, Texas)-- General Motors Corporation (NYSE:GM) (Detroit, Michigan) announced this week that it will close four of its assembly plants in 2010. The plants, located in Janesville, Wisconsin; Moraine, Ohio; Oshawa, Ontario; and Toluca, Mexico; all assemble either pickup trucks or SUVs. The closures place the future of 10,000 hourly workers -- 2,500 at each plant -- in limbo.

With high oil and gas prices not expected to disappear anytime soon, the automotive giant's move was not entirely unexpected. Sales of pickups and SUVs have dropped dramatically in recent months as automakers try and scramble to adjust production to meet the demand for smaller, more fuel-efficient vehicles.

For the 10,000 workers that staff these plants, the future is looking bleak. GM has said that it does not expect to move production of other vehicles to these closing plants so for all intensive purposes, the affected workers will be looking elsewhere for jobs. About 19,000 GM hourly workers, a quarter of the automaker's hourly workforce, recently opted to accept the latest round of early retirement or buyout offers that will take effect by the end of the year. Executives have indicated that many of the 10,000 workers whose plants will close will be offered opportunities vacated by the 19,000 who accept these offers.

However, this is small comfort to those whose jobs will be eliminated in 2010. GM will likely offer them positions at a lower-wage scale as they continue their efforts to restructure the company and save money. The closure of these four plants will save the automaker $1 billion per year starting in 2010 and, combined with previous cost-cutting measures, will raise the total cuts made by GM to $15 billion per year. While this is a very significant savings for GM, it is hard to tell at this point whether the automaker will be able to ramp up production of smaller vehicles, like the Chevrolet Volt, which is scheduled to make an appearance in showrooms by the end of 2010, fast enough to make an immediate impact on the bottom line.

GM will add a third shift at its Lake Orion, Michigan, plant to increase production of the Chevy Malibu and Pontiac G6 models, and a third shift at its Lordstown facility in Warren, Ohio, to increase production of the Chevrolet Cobalt and Pontiac G5. The new Volt will be assembled at the Hamtramck facility in Detroit when production begins in late 2009 or early 2010. GM also plans a new more fuel-efficient engine that should boost miles per gallon by at least 9 when it is in production.

GM executives have said that they do not see the trend to smaller, more fuel-efficient cars going away anytime soon. This could mean the end of the SUV and, to a lesser extent, the pickup within a few years if this forecast holds true. It remains to be seen whether other automakers will follow suit and reduce pickup and SUV production but Ford Motor Company (NYSE:F) (Dearborn, Michigan), which recently announced the elimination of up to 2,000 salaried positions, has said it will announce additional cost-cutting measures in July.

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