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GM Drawing Up Contingency Plans for Boosting Production of Smaller Vehicles

25 October 2005

The Financial Times reports that General Motors is drawing up stand-by plans to boost production of smaller vehicles in case the recent increase in US demand for fuel-efficient cars and light trucks continues into next year.

In an interview with the paper, Rick Wagoner, chairman and chief executive, said it remained unclear whether this autumn’s spike in gasoline prices had caused a permanent shift in US drivers’ preferences, but the company had to be prepared.

“If we look at the sales trends of the past 45 days and extrapolate those for next year, it results in a significantly different production plan from what one would have thought 45 days ago,” he said in an interview with the Financial Times at GM’s Detroit headquarters.

“We’re asking ourselves about the robustness of the production forecast next year.”

GM’s planning comes shortly after the automaker announced a loss of $1.6 billion in the third quarter (earlier post), and a loss for the first nine months of 2005 of $4.1 billion.

Ford announced this month that it will increase production of its hybrids by tenfold by 2010, Toyota is ramping its hybrid production, and the major Asian automakers are all planning the introduction of new, smaller cars next year.

The GM Chairman predicted enough demand for the new T900 versions of its full-size SUVs (earlier post) to fill two factories and part of a third, which will also be able to build pick-up trucks.

GM is banking on earning a larger share of a shrinking market segment with its new SUVs, which will also be the first platform on which GM will apply its two-mode hybrid system.

Mr Wagoner said it was “highly uncertain” how much demand there would be for hybrids, which offer better fuel consumption but cost more. But he said GM was building more production capacity for hybrids than he expected to use.

October 25, 2005 in Fuel Efficiency, Hybrids | Permalink | Comments (20) | TrackBack (0)

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That's good news. Better late to the party than a no-show, after all.

If GM can (albeit slowly and grudgingly) transform to be a lightweight company selling a wider range of higher MPG cars, it'll be good for the American workforce and American taxpayers, as well as provide more competition -- and hence more choices and lower prices -- in the higher MPG market segments.

So GM: welcome.

Not for the workforce... most likely all the small cars will be built in factories outside the us. They are after all planning to shutter alot of us plants and can workers.

It will be interesting to see how GM (and Ford) will manage to economically build high quality smaller vehicles with $65/hour North American union workers. It is indeed a very tall order. Unions and their members will not easily accept to produce more (+ higher quality)for much less.

Outsourcing, on a very large scale, may be the only way out, specially for plug-in hybrids, where mechanical and electrical components can be manufactured for a small fraction of the USA/Canada cost.

The North American Car Unions rule or dominamce may be getting near their extinction unless they can find ways to compete against more productive external groups.

Import quota and/or high tariff, (as presently used against the Canadian lumber) to protect the local car industries, will not be accepted by the International communities without strong retaliation.

A fifty percent (50%) progressive devaluation of the USA and Canadian dollar (versus all other currencies)would help to make North American manufactured products more competitive for a while or until such time as union workers get $100 + an hour.

Alternatively, we could 'hope' that the other industralized countries progressively re-evaluate their currency by 100% or more to raise the cost of their manufactured products in USD. This is a much more difficult solution but it already happened, to a certain extend, with the Euro, the Canadian and Singapore $$ etc.

Arificial currency variations can help in the short term, but it does NOT create long lasting increases in product QUALITY or internal PRODUCTIVITY.

Basically, when an industry can no longer compete it should consider the possibility of closing down or moving out and that's what may probably happen with GM and Ford operations in North America, unless......

Don't blame the UAW for stupid management decisions.

Don't blame management for UAW intransigence.

I assume tom that your a uaw worker? I would suggest looking into a new job NOW as your likely toast.

The only way to make and sell 10-15000 buck small cars is to use cheap labor and cut health care costs to the bone. The uaw will never manage to cope so its days are over.

"The only way to make and sell 10-15000 buck small cars is to use cheap labor and cut health care costs to the bone. The uaw will never manage to cope so its days are over."

Thats funny. Honda and Toyota don't seem to be having any problems producing small $14k cars in $65 an hour America or Japan. Then again the workers there have never felt the need to unionize against management. I wonder why?

Gone are the days when a man would stay with his company for 20 yrs.

To state the obvious, this sort of mistrust between employees and employers leads to lack of job security and unnecessarily strong union intervention.

Maybe the Japanese are holding onto their old school "I love my company and it loves me" routine a little longer then the rest of us.

The key word in GM's announcement is "small". GM is perpetuating the stereotypical view that only small cars can get good gas mileage. The 7 year old Taurus I drove to Seattle today got over 30 mpg. I'll bet we could design mid-size cars with even better mileage today if we put our minds to it.

Actauly justin the fact is the main tripping point for gm and ford is the health care cost. 1500 per car just for that alone for gm. Mind you thats because gm has 1 MILLION former workers and 200k current ones all under a health care plan that costs a mind boggling amount of money to run.

Most americans now have learned what is ENOUGH health care and what is too much to afford. The uaw is about to learn that lesson the hard way.

Wintermane,
I have never been a member of the UAW but my brother will be retiring as a GM employee of 34 years at the end of this week. I am a member of the Amalgmated Transit Union and have been disability retired for nearly 3 years. I have often complained about the lack of creative thinking at the international level of the ATU. The unions came into being because of inhumane working conditions of the early 20th century. A factor in the ATU's early history was the number of streetcar operators who were freezing to death every winter. A factor in the UAW's early history was the need to squat over a hole in the factory floor when the need for a restroom arose. The physical beating of production line workers was a normal part of maintaining discipline. Some of the pension expenses GM faces is because of placing too much GM stock in the pension fund's portfolio and it is the UAW's fault only because they let GM get away with it. Compromises have to be made in negotiations. It was because union workers insisted that they recieve a fair share of their productivity that a middle class was so big at one time and all those non union businesses had well paid customers.

Look bub yes it was bad way back when thats because it was bad nearly everywhere way back when. Right now the main issue is union labor costs enough that it cant be used in industries that compete with non union labor.

One of our local unions fell flat on its ass big time when the company they all worked at up and went belly up. Ther went EVERYTHING and that town is a wreck now and being replaced by a massive strip of suburbia that snapped the entire damn area for cheap as a result.

My old friend was in that union and was going to colledge to learn SOMETHING to get by as a now rather poor old man and he had to admit none of his old buddies had ever realy thought how expensive thier health care had been until he had to try and replace it with his own money. It had been costing 35000 yes 35 grand a year per person before that company tanked.

Right or wrong if what your standing on falls your still gona fall.

So if we bust all our unions and drive our workers' wages back to where they were in 1923 in the name of Free Enterprise, what the hell is so great about Free Enterprise? Our bosses justified all their crimes against workers, nature and other sovereign states in the name of Progress, which only America can dictate. Our workers were talked out of revolution 70 years ago with the promise that their labor would bring genuine improvements in their lives. Result: American wages soared and for the first time in history life was good for ordinary people. If that was all a scam to get workers to disarm while their bosses re-engineered the GOP around racism and Christian bigotry to trick them back into poverty, and welch on all their pension promises, then progress is a lie, and it will be used to screw our descendants forever or until the oil runs out.

Don't say "we won't go that far back". Henry "Hitler's Favorite" Ford generously paid $5 per 10-hour day in 1923. Given the inflation since then, that's about $75-100 a day now. Yet $7.50 to 10 an hour is more than Chinese or Mexican workers get now to make far more advanced cars. If we have to cut our auto workers' wages to Mexican levels to "compete", what happens to our consumer economy? And in 1923 you could buy a Model T for $290. One of Henry's workers thus needed to work 58 days to buy a car. Try doing that with a non-union wage job today.

Don't be smug because you're not a "backward" union worker who deserves to be cheated out of past promises. The wage cutters are coming for you and your promised benefits too. The whiter your collar, the bigger the savings in finding an educated Chinese to replace you. The race to the bottom will make us all losers.

"Ther went EVERYTHING and that town is a wreck now and being replaced by a massive strip of suburbia that snapped the entire damn area for cheap as a result."

"The race to the bottom will make us all losers."

AKA, Wal-Mart Nation. See the recent NY Times article on Wal-Mart and its efforts to further reduce employee benefits.

See also the current Time magazine cover story on "The Great Retirement Ripoff."

This stuff is scarier than any Halloween story I can think of. These are all part of the same trend. If we don't think they're eventually going to bring all of us down we're simply in denial. Together we stand, divided we fall. Right now we're probably more divided than anytime since the Civil War.

I dont earn alot very few around here do. But its a nice place to live and ive got food and shelter and good people that care about me and a puter and at tv and so on and so forth. Thats better then most and other then the fact im ugly and clumsy and about as handy as teflon coated duct tape I have little to gripe to god about...

And yes im not a union man I dont trust em never will.

Oh I should say I dont trust gm management either but then im not a trusting person;/

Being in a union like the uaw is cuase enough for worry being in such a union like that and working for gm is cause for freaking out. The uaw slows changes up big time and gm is THE slowest acting car company. The combo is doomed to failure.

And personaly I never did see the wisdom in fighing for long term garantees from a comopany I didnt expect to have a long term.

Unions should have ceased to be needed a long time ago. The main reason unions exist to this day is due to the generally despotic nature of corporations. If workers had more direct control over the decisions being made exclusively by management there would be no need for unions at all. Breaking unions will do nothing for the long term stability of the industry, it's just addressing the symptom but bringing workers into the decision making process in a meaningful way would effectively bring the unions down and cause the industry to be more efficient. Corporations resist this because it can lower profit, so we're stuck with unions to balance out the power structure.

there is plenty of blame to go around, but the big reason I won't buy American is I got taken to the cleaners in the past (got to pay for a Taurus twice!), and I don't see where if I bought a bloated American car now things would be any different. I looked at those BIG SUV's a couple of years ago and told my wife they reminded me of those big 500 cu. in. Caddies, just before the last oil crisis, which I am old enough to remember. Sure enough, history repeats itself, and the big 3 are left with their collective pants down and there nutless sacks blowing in the wind.

The fact is that the managements are to slow and fat, and the unions under skilled and over-priced. I DEMAND quality, and as soon as one of the big 3 shows me that they can deliver, I try another one. So far, I'll they've offered me is low-priced Korean crap on the low end -- yeah baby, sign me up for some of that -- I like rope burns too.

Kenny,
Rope burns are win :)
Specifically, I agree with you on the expensive US gear that feels and drives cheap.

Everyone here seems to be missing the main point.
Its all about the exchange rate. You go over there with US money and you'll be able to get a weeks's worth of shopping for 10 bucks.
China may have its sweat shops in places as the stereotype would lead you to believe. But the simple reality you will find upon visiting mainland red is in the civilised places where working conditions and proportional living wages are equivalently better then in the US.
They are a modest people who are eager to please an contribute their bit.

The ironic and slightly amusing thing hystorically is the stronger currancies from the stronger nations have always exploited the rest. Sweet justice I say.

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