GM, Ford may close plants while UAW pushes for jobs amid recovery

GM, Ford may close plants while UAW pushes for jobs amid recovery
Craig Trudell
Automotive News | May 31, 2011 – 6:59 am EST

DETROIT (Bloomberg) — General Motors Co. and Ford Motor Co. may enter contract talks with the UAW this year seeking to close as many as six assembly plants to boost profit while the union tries to save jobs amid an industry recovery.
GM, 33 percent owned by the U.S. after the government’s 2009 bailout, may move or add workers to existing plants rather than retain factories in Louisiana, Wisconsin and Tennessee that are idle or slated to shut. Ford, which intends to close a plant in Minnesota late this year, also may choose to shutter Michigan and Ohio plants making slow-selling vehicles, industry researchers said.
GM, Ford and Chrysler Group LLC have lowered costs by cutting more than 65,000 union jobs and shutting 10 assembly plants since the previous UAW talks four years ago, which established a two-tiered pay system in which new workers earn less. Automakers may seek to bring more workers into the lower- paying tier to preserve some jobs rather than flout the Obama administration’s $85 billion lifeline to GM and Chrysler.
The UAW and automakers say they’re talking at least informally all the time. The union will seek early settlements to contracts that expire on Sept. 14, two people familiar with the plan said in April.
Rising sales
U.S. auto sales may rise to 13 million cars and light trucks this year, the average estimate of 16 analysts surveyed by Bloomberg. Deliveries climbed to 11.6 million last year from a 27-year low in 2009, according to researcher Autodata Corp.
Kim Carpenter, a GM spokeswoman, said the company hasn’t decided how many plants it may close and what savings might result. Based on past shutdowns, the benefit might be substantial. In 2008, GM announced the closing of four light- truck plants that it said would save it $1 billion a year.
The savings from the new closings may not be similar, partly because two of the three most likely targets already have stopped producing vehicles. The three facilities had about 6,900 workers in 2007, when GM agreed to a UAW national contract. The net job loss would be less than that because GM is adding employees at other plants.
GM told investors before its initial public offering last year that it previously needed annual U.S. sales of 15 million vehicles and a 25 percent market share to be profitable, in part because it had too much capacity and too many workers.
Break-even point
The automaker’s government-backed restructuring reduced its break-even point in the U.S. to an annual sales rate of 10.5 million units and about an 18 percent share.
Among the vulnerable GM plants, an idled Spring Hill, Tenn., assembly factory is the likeliest to survive, said Sean McAlinden, the chief economist at the Center for Automotive Research, and Art Schwartz, a former GM labor negotiator who is now president of a consultancy in Ann Arbor, Mich.
GM, which received $50 billion of assistance from the U.S., has invested $1.23 billion since 2007 at the Tennessee site, which includes a paint shop and factories that make small engines and parts such as doors, wheelhouses and dashes.
“It’s kind of sitting there saying ‘Please, use me,'” Schwartz said. “But it’s only going to have a chance if industry sales recover enough.”
GM’s 88-year-old plant in Janesville, Wis., idle since 2009, is unlikely to make the cut because it’s GM’s oldest, according to McAlinden and Schwartz. GM has removed some equipment from the Janesville factory that is the most costly to replace, such as robotics and conveyers, Carpenter said.
Its plant in Shreveport, La., is scheduled to cease production in June 2012. Motors Liquidation Co., formed to liquidate unwanted assets that GM left behind as part of its 2009 bankruptcy, owns the site.
Ford too
Ford’s assembly plants in Avon Lake, Ohio, and Flat Rock, Mich., are likely targets because of weak sales of vehicles made there, said McAlinden and Robert W. Clark, who negotiated national bargaining agreements for the automaker for more than 30 years before retiring in 2002.
Mazda Motor Corp. said in February it may pull out of the Flat Rock plant, where it has been a partner with Ford since the 1980s. The factory, which opened in 1987, makes the Ford Mustang sports car and Mazda 6 sedan, both of which have been losing market share.
GM’s Chevrolet Camaro snapped the Mustang’s 24-year run as the top-selling sports car in 2010.
Econoline questions
Ford’s Avon Lake plant makes the Econoline van, which may lose sales to the Transit Connect electric delivery van the automaker plans to build in the U.S. Ford said in January it would invest $400 million in its Claycomo, Mo., plant, which may build the Transit, consultant Michael Robinet of IHS Automotive said at the time.
Ford, which didn’t receive government aid, has no announcements planned on the Avon Lake plant, and “it would be far too premature to comment on future product plans” there, Marcey Evans, a Ford spokeswoman, said in an e-mail. She declined to comment on Flat Rock.
Ford’s Twin Cities Assembly, which opened in 1925 in St. Paul, Minn., is the automaker’s oldest plant and is scheduled to close late this year, Evans said. The plant makes Ranger pickups.
Chrysler, 6.6 percent owned by the U.S., doesn’t have any factories that are under threat of closing, General Holiefield, the UAW vice president in charge of Chrysler, said in a May 10 interview in Detroit.
‘About building’
“Our whole conversations have been about building,” he said.
UAW President Bob King is trying to boost the union’s membership, which has fallen to about a fourth of the high of 1.5 million reached in 1979.
Joe Ashton, the UAW vice president for GM negotiations, said in March the union would consider expanding the use of lower wages for new workers in exchange for the largest U.S. automaker adding jobs. The union would seek to raise that starting wage, which is “not a middle-class wage,” he said on May 25.
GM said May 10 it would invest $2 billion in plants in eight states. The automaker said it has committed $3.4 billion to U.S. factories since emerging from bankruptcy, creating or preserving more than 9,000 jobs.
GM retained 1,550 hourly and salaried jobs at a plant in Orion Township, Mich., to build the Buick Verano and Chevrolet Sonic cars this year. About 40 percent of the workers will earn half the regular rate of $28 an hour.
“The leadership wants the count to grow,” McAlinden said. “They don’t mind if it’s second-tier workers.”

 

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