The Plants That Gm Will Probably PadlockJames B. Treece
The sword has been dangling over General Motors Corp. factories for nearly a year: Which ones will shut? Finally, the wait is drawing to a close. A day or two after a Dec. 7 board meeting, GM President and Chief Executive John F. Smith Jr. is expected to announce where the cuts will come.
By choosing which factories and cars survive and which die, Smith will offer his clearest signal yet on GM's future direction. The message has been a long time coming: It was on Dec. 18, 1991, that the auto maker said it would close 21 factories, including six final-assembly plants. Since then, it has identified only two of the six plants that will be shuttered: a minivan plant in Tarrytown, N.Y., and the Willow Run big-car factory near Ypsilanti, Mich.
Meanwhile, GM workers across the country were left to worry about their jobs. Local officials, reliant on GM taxes, crossed their fingers. At the full-size car plant in Orion Township, Mich., United Auto Workers Local 5960 President Ernie Emory says: "We're anxiously waiting just as everyone else is."
What took so long? Turmoil at the top didn't help. But even without the recent management shakeup, which forced out GM Chairman Robert C. Stempel, President Lloyd E. Reuss, and a handful of other senior managers, choosing which plant to close wouldn't have been easy (table). GM had to weigh each plant's work force, proximity to suppliers, and markets, productivity, and a host of other factors. The hardest decision of all: which cars and trucks to jettison.
COMPACT CALCULATION. In sports models, for instance, Smith had to arrange to convert the 1996 Chevrolet Corvette to the same chassis as the Chevy Camaro before he could move Corvette production to St. Therese, Que., and therefore close the inefficient Bowling Green (Ky.) plant where 'Vettes are now built (box). To figure out how many small-car plants GM could close, Smith had to decide how many of the cars GM could sell during the next several years. Excluding the surging Saturn, GM has the capacity to build 930,000 compacts a year at plants in Lordstown, Ohio, and Lansing, Mich. That means he's unlikely to bet that GM can sell almost 1.2 million small cars a year, in addition to Saturn, and keep the Wilmington (Del.) plant open.
Smith's obvious move would be to drop GM's most inefficient plants. After Bowling Green, however, GM has too many of similar mediocrity. In a recent study, Troy (Mich.) consultants Harbour & Associates compared productivity at 31 North American assembly plants owned by GM, Ford, and Chrysler. GM factories swept the bottom 10 spots. Some of the plants' woes resulted from poorly designed and tough-to-build cars and trucks. Others posted slow line speeds--a GM attempt to boost quality. But that policy also hurts productivity.
Even GM doesn't dispute the report's discouraging conclusions. Take GM's plant in Doraville, Ga., which now builds the Oldsmobile Cutlass Supreme and has been promised the new minivan that will replace the one built at Tarrytown. It takes twice as many workers, 4.97, to assemble a car there as it does at Ford Motor Co.'s Taurus plant just down the road in Atlanta.
BALANCING ACT. Smith had to juggle geopolitical concerns, too. The Oklahoma City plant's reputation for quality and solid labor relations may not have been enough to save it: Its aging Buick Century and Olds Ciera are part of GM's bloated midsize car line. But its proximity to Mexico and the effects of the pending North American Free Trade Agreement may tip the balance in its favor. Says Daniel D. Luria, a senior researcher at the Industrial Technology Institute: "Mexico is the wild card."
Then there's Canada. GM has two factories in Oshawa, Ont., building midsize cars, and a third assembling large pickups. An obvious cut? Maybe, but so far, the only GM of Canada assembly plant set to close is the small Scarborough (Ont.) van plant. Exchange rates and lower health-care costs give Canadian plants a $7.50-per-hour wage advantage over U.S. plants, estimates consultant James E. Harbour. Still, the Canadian Auto Workers union is seen as less amenable to working with management to solve GM's problems, and the UAW wants Canada to share the pain.
To cover the cost of its closings, the carmaker already has taken a $4 billion charge. Sanford C. Bernstein & Co. analyst Joseph G. Paul estimates that for every 10,000 employees who leave GM, it could save up to $700 million a year. That's why Smith also aims to trim white-collar ranks by 8,000 workers in 1993 and likely will also announce a new package of employee buyouts to do it.
This round of plant closings will trim GM's capacity by roughly 1 million cars and trucks, to 5.4 million, but it won't solve its problems. Indeed, these shutdowns may not be the last: The Arlington (Tex.) plant that beat out Willow Run in a head-to-head contest may survive only as long as Americans keep buying its big cars. That means GM plants and their communities may find that Smith's decisions are final--but only for now.