Unrest hurts GM hot-sellers

As stock in showrooms dwindles, so too may buyer enthusiasm for firm’s Enclave, Malibu, analysts say.

Sharon Terlep / The Detroit News

General Motors Corp. dealers have waited years for the automaker to turn out the kind of must-have vehicles that draw throngs of shoppers into showrooms and sell without deep price cuts.

GM delivered with the Chevrolet Malibu sedan and Buick Enclave crossover: Both models are flying out of showrooms almost as quickly as the automaker can ship them from the factory — with minimal or no incentives.

But dealers around the country are now struggling to keep the vehicles in stock as labor disputes with the United Auto Workers imperil production of both vehicles.

"It’s frustrating, you finally have a car that’s competitive," says John McEleney, who owns Chevy and Buick dealerships in Iowa. "If a customer comes in and asks for a car I don’t have, I don’t know what to tell them with everything that’s going on."

Two key GM factories are among the half-dozen plants ensnared in labor disputes between the union and automaker. The Delta Township factory near Lansing that makes the Enclave has been on strike since last week and a Kansas City, Kan., plant that makes the Malibu is threatening to walk out today.

GM has about five weeks’ supply of both vehicles and about eight weeks’ worth of the GMC Acadia, another popular crossover made at the Delta Township plant.

Even those thin cushions are deceptive, however. To have adequate inventory on the floor and an ability to meet custom orders, dealers ideally should have at least eight weeks’ worth, analysts say.

"If you want to sell 10 units, you have to have 20 in stock," said Tom Libby, senior director of industry analysis at Power Information Network, a unit of J.D. Power and Associates. "You have to keep the pipeline full. If you have five weeks’ supply, it’s not like you can lose production for four weeks and six days."

Dealers must have some vehicles to keep on display as well as to sell. And customers are more likely to buy when they have a variety to choose from. Even if GM has several weeks’ worth of a vehicle, the actual supply may be much smaller when it comes to vehicles with a certain trim level or a particular mix of features.

Consider McEleney’s situation. For months after the Malibu’s November launch, he could never get more than one or two at a time on his lot. Recently, he’s been able to get four or five at a time, but eight to 10 would be better to make sure customers can drive off the lot with the vehicle they want and not wait weeks for one to be ordered.

On Wednesday, McEleney said he had only one Malibu left. He has two Enclaves on the lot at his Buick store.

Both are important vehicles. The Malibu is GM’s most competitive entry in recent history, and has the potential to challenge the Toyota Camry and Honda Accord in the industry’s largest segment: midsize cars. The Enclave is slugging it out in the much narrower crossover field. But the segment is growing and the high-end Enclave, with a $33,000 base starting price, helps GM’s bottom line.

GM says it produces about 750 crossovers a day at the Delta plant, so the company has lost about 4,500 units of production in the six days the plant has been shut down. GM sold about 14,000 of the three crossovers combined last month. "I understand the strategy to strike a plant where it hurts," McEleney said, who is especially worried about the Malibu. "It’s unfortunate, because this car can be a real key to General Motors getting back into that segment."

Others share the sentiment. In a recent meeting of Chevy dealers who are part of auto retailer Group 1 Automotive, many said they were worried about losing Malibu production, said company spokesman Peter DeLongchamps. A strike at parts maker American Axle & Manufacturing Holdings Inc., now in its ninth week, has created a parts shortage that has stalled production of GM’s large trucks and SUVs. That’s helped dealers trim inventories of the slow-selling trucks, DeLongchamps said.

But the Malibu is an entirely different story.

"They said they’ve had trouble getting them anyway," DeLongschamps said.

The UAW says wrangling over plant-level labor contracts is behind all the strikes and strike threats. Thorny issues, from plant work rules to union grievances, make local talks tough in the best of years. But industry experts say a larger strategy is likely at play as well, as the UAW grapples with unprecedented demands for wage and benefit cuts throughout the industry and the walkout at American Axle.

GM has been watching the situation nervously, with its executives trying to stay out of the public fray. At a luncheon this week to roll out new versions of the 2008 Malibu to automotive media, Chevrolet General Manager Ed Peper said he wouldn’t speculate on how GM would fare without the Kansas City plant.

"Certainly, we need every unit we can have," Peper said. "I’d like to see (negotiations) settled soon."

The automaker may have some room to shuffle production. GM also builds the Malibu at its Orion plant alongside the Pontiac G6. That plant already has a local contract in place, so a strike is highly unlikely.

For dealers like Mark Scarpelli, president of Raymond Chevrolet in Antioch, Ill., production logistics and labor politics are of little relevance. He is just worried about the dispute, especially considering he’s selling two to three Malibus a week. Customers, Scarpelli said, don’t seem to be aware that GM is having labor issues.

"We’ve got to work together and resolve our differences," he said. "We need to get to the matter at hand and make sure the company is viable and that the needs of the union are met."