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Analysts: More GM factory closures likely


ASSOCIATED PRESS

1:54 p.m. July 18, 2008

ROMULUS, Mich. – At a General Motors Corp. factory just west of Detroit, about 1,000 workers are still cranking out mighty but thirsty V-8 engines that go into pickup trucks and sport utility vehicles.

The automaker's plans to cut 300,000 pickups and SUVs out of the production schedule by the end of next year should be a concern at Romulus Powertrain, because industry analysts say any factory that makes mostly truck components could be in danger of closure.

GM officials say half of the production cut will come from accelerating previously announced closures at four assembly plants. They hinted the other half could come from canceling shifts at other factories.

Analysts, however, say its possible another assembly plant could be shuttered, and they say some factories that make truck parts almost certainly will be closed.

“Virtually no factory is off the table,” said Michael Robinet, vice president of global forecast services for CSM Worldwide, an auto industry consulting company based in Northville, Mich.

GM announced in June that it would idle pickup and SUV factories in Janesville, Wis.; Oshawa, Ontario; Moraine, Ohio; and Toluca, Mexico, as it tries to deal with a rapid shift to smaller vehicles brought on by $4-per-gallon gasoline. This week, the company said it will speed up the closures, although it didn't give specifics.

GM will be left with four pickup plants, one SUV factory and one full-size van plant in the U.S. It also has truck factories in Mexico.

Of the U.S. pickup plants, analysts said one in Pontiac is most vulnerable because it's operating on only one shift, although it might not be closed for several years.

A pickup plant in nearby Flint is still running on two shifts, and it's presumably safe because it's the only one that builds the one-ton crew-cab body style of the heavy-duty pickups, said Haig Stoddard, an auto analyst with the consulting company Global Insight.

The Fort Wayne, Ind., pickup plant probably won't be considered for closure because it's GM's productivity star with a highly flexible work force, said Greg Gardner, an analyst with the Oliver Wyman Group, which authors a respected annual study on auto plant productivity.

A Shreveport, La., factory that makes midsize pickups also should be safe, and the Arlington, Texas, SUV factory likely will remain for the time being, although production could be shifted at some point to Mexico, analysts said.

But several parts plants that mainly feed truck factories could get the ax because GM won't need as many engines, transmissions and other parts once the four assembly plants are closed, analysts said.

“I'm sure there are going to be cuts in powertrain because they have so many plants that are building engines for the full-size trucks,” Stoddard said. “There probably will be some plant closures.”

Romulus, which along with several other plants builds mainly V-8 engines, is among those that might be closed, Gardner said.

“Given the gasoline prices now, do they need that much V-8 capacity?” he asked.

Larry Long, president of the United Auto Workers local at the plant, said everyone knows GM will be cutting back, yet he's not too worried. People, he said, still will need pickup trucks and SUVs for work or to haul people, despite high gas prices.

“You're still going to have so many trucks. You're still going to have some SUVs,” he said.

GM has more than two dozen parts plants, most of which make components for both trucks and cars. Analysts said those that make predominantly truck components are particularly vulnerable, but the decision on which plant to close is complex.

GM said it's unfair to workers to speculate about the factories.

“Many factors come into play in making production plan decisions that are not encompassed in this kind of speculation,” the company said in a statement.

GM Chief Operating Officer Fritz Henderson said earlier this week that thousands of jobs likely would be cut, but he would not give a specific number. About 19,000 hourly workers recently left the company through buyout and early retirement offers, which could help buffer the losses.

The company also is adding workers at its Orion Township, Mich., and Lordstown, Ohio, factories, both of which make fuel-efficient cars that are selling well despite the declining U.S. auto market.

Analysts said if the market for trucks and SUVs doesn't recover some, GM will likely have to make further cuts because it can't operate factories on one shift and make a profit. The company has lost billions during the past three years, with steep losses in North America.

“You need to run at high utilization rates to even dream about having a successful manufacturing operation,” Robinet said.

Gardner said more jobs also could be created if GM decides to convert a truck plant to making cars as the U.S. market continues to shift.

“Just closing all your truck plants is not a viable long-term strategy,” Gardner said. “Some of them will have to be converted.”


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