GM’s Spring Hill workers worry

April 5, 2009

GM’s Spring Hill workers worry

Plant could be closed as government seeks deeper cutbacks

By G. Chambers Williams III
THE TENNESSEAN

http://www.gm.com/">General Motors Corp.’s Spring Hill assembly plant could face a more difficult battle to survive a new round of auto industry cuts sought by the Obama administration in the wake of the ouster of GM’s chief executive last week and the prospect of an even leaner GM.

In return for any continued federal financial support of GM, the Obama administration said, the automaker’s reorganization plan must include steeper reductions in manufacturing capacity and labor costs, even though the company already has closed factories and reduced its work force by about 60,000 in the past year.

"We’re a little nervous about what’s going on with the decisions being made about the plants," said Michael Herron, chairman of United Auto Workers Local 1853, which represents the 2,911 hourly workers at Spring Hill.

"We don’t know when the decision will be made," he said, "but I believe they are going to move very, very quickly, and we may be at risk."

With GM’s remaining plants under-utilized because auto sales are at their weakest level in three decades, Spring Hill could suddenly be vulnerable, industry analysts suggest. That’s the case even though the carmaker spent $690 million to upgrade the facility in 2007 to prepare to build the new Chevrolet Traverse crossover utility vehicle, which went into production last fall.

Sales of the Traverse have been below expectations, and the Spring Hill plant is operating at an estimated 24 percent of capacity.

Erich Merkle, a Grand Rapids, Mich.-based auto analyst, thinks Spring Hill could be jettisoned in favor of GM’s newest plant in Lansing, Mich., which makes vehicles similar to the Traverse and has excess capacity to take over Spring Hill’s current production.

The Delta Township plant in Lansing, which opened in 2006, makes three other crossover vehicles that are closely related to the Traverse — the GMC Acadia, Buick Enclave and Saturn Outlook.

At current sales levels, all four of the vehicles could be built at either plant, but politics could give the Michigan plant the edge, Merkle said. "Spring Hill could be on the bubble because it’s in a red state, and Michigan is a blue state," Merkle said. "The governor of Michigan is a Democrat, too, and she needs all the plants she can get.

"These decisions probably aren’t always going to be made from an objective point of view," Merkle said, "but I don’t see them closing Lansing Delta. If it comes down to a choice between the two, Delta would get the nod."

That’s also how U.S. Sen. Bob Corker, R-Tenn., sees things. Last week, Corker said he’s concerned that Spring Hill could lose out if the Obama administration chooses which plants to close based on how a state voted in last fall’s presidential election. Tennessee went "red," with a majority of voters casting ballots for the Republican candidate, U.S. Sen. John McCain of Arizona.

In response to President Barack Obama’s decision to fire GM Chairman and CEO Rick Wagoner, Corker said that "in essence, this administration has decided they know better than our courts and our free market process how to deal with these (auto) companies."

Spring Hill vs. Lansing

Opened in 1990 to assemble the new Saturn brand of economical small cars, Spring Hill is the third-newest GM assembly plant in operation. Lansing is GM’s newest, built at a cost of $1.5 billion in 2006.

Saturn production ceased in March 2007, and the plant was refurbished at a cost of several hundred million dollars to build the new Chevrolet crossover. Recent sales of the Traverse have been weak, along with the rest of the car market.

While the Traverse is considered by analysts to be one of the bright spots in GM’s lineup, sales have failed to take off as planned, with just 18,141 of the vehicles delivered this year through March 31.

At that rate, GM would sell just 72,564 of the Traverse for the entire year, while the Spring Hill plant has an annual production capacity of about 300,000 vehicles, according to analysts and the UAW.

Besides the Traverse, the Spring Hill facility also builds fuel-efficient four-cylinder Ecotec engines for a variety of other GM vehicles. The plant produced 418,566 of the engines last year for such models as the Chevrolet Malibu and Cobalt sedans.

Whether the plant would retain the engine work even if its vehicle-assembly operations were shut down remains unclear, and a GM manufacturing spokeswoman declined to discuss the possibilities of closing any of the automaker’s remaining facilities.

The Lansing and Spring Hill plants should be safe if operating decisions are made rationally, said David Cole, chairman of the Center for Automotive Research in Ann Arbor, Mich.

"Spring Hill is still a relatively new plant and has been refurbished to make it much more flexible than it has ever been," he said. "It’s a very good plant, and when the economy recovers, those GM crossover vehicles are going to be very strong.

"It would be a shame for GM not to be able to meet consumer demand because they closed one of the plants. If they walk away from that plant, that would be a very strategic error," Cole said, "but in politics anything is possible."

The Lansing plant has the capacity to build about 250,000 vehicles annually, but so far this year the automaker has sold just 25,207 of the crossovers built in that facility, an annual rate of just over 100,000.

Rebound is expected

But nobody really expects U.S. auto sales to stay at the 9.3 million annual rate that automakers experienced in March, Cole added.

"When sales climb back to even a recession-year level of about 13 million, GM will need both of those plants to build the crossovers," he said.

Cole said Spring Hill is one of the three most efficient plants that GM has, and he believes Spring Hill, Delta Township in Lansing and a separate Lansing Cadillac plant would be the last three facilities that the carmaker would close.

The UAW’s Herron said he believes Spring Hill workers have done all they can to help position the plant for a strong future, but they are deeply concerned about what might happen.

"Our concern is that Michigan might have more political clout, if it came down to crunch time," Herron said. "But these UAW members down here are the best of the best, and have been through tens of thousands of hours of training.

"They have done everything that has been asked of them by GM and the union leadership, and they can do nothing more than build high-quality vehicles and let their performance speak for itself."

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