GM plants’ 2nd chances would save few jobs

May 12, 2019 12:00 AM UPDATED 23 HOURS AGO
GM plants’ 2nd chances would save few jobs

Two plants on the chopping block at General Motors might have found new life, but their futures remain works in progress, and even the best outcomes are unlikely to save most of the jobs being lost.

In Ohio, GM is in early discussions to sell its Lordstown Assembly Plant to Workhorse Group Inc. for production of electric vehicles, while in Ontario, Oshawa Assembly will turn into an aftermarket parts hub under an agreement reached last week with Canada’s auto union.

Both deals, if completed, would have similar outcomes: much smaller work forces, long-term uncertainty and a lesson in how difficult it is to replace or save factory jobs when automakers decide to shutter a major plant.

GM’s plan for Oshawa keeps only about 300 of the 2,600 jobs being cut there, and experts say there’s no plausible scenario in which Workhorse, without additional product commitments by GM or a third party, could keep more than a few hundred people at Lordstown, which as recently as three years ago employed 4,500 workers in economically challenged northeast Ohio.

While plans for Oshawa have been agreed upon by GM and the Unifor union, the potential Lordstown deal could fall through and there are many unknowns about Workhorse and its plans for the plant.

Workhorse, a little-known EV maker near Cincinnati with fewer than 100 employees, has been unprofitable since its founding in 2007 as AMP Electric Vehicles and ended the first quarter with just $2.8 million on hand — most of it borrowed. One day before President Donald Trump declared the potential sale to be a done deal and “great news for Ohio!” in capital letters on his Twitter account, publicly held Workhorse told regulators that it was in danger of becoming insolvent by midyear.

GM said it was negotiating with an entity led by Workhorse founder Steve Burns, who stepped down as CEO in February but remains on the board of directors. That board is led by Ray Chess, who had responsibility for crossovers and commercial trucks during a 37-year career at GM. Workhorse said it would hold a minority stake in the new company, which was created to buy Lordstown, but few other details, including a funding source, are known.

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That GM viewed the company as serious enough to open discussions helps legitimize Workhorse, but the EV maker’s ability to accomplish such a massive undertaking remains “a big wild card,” said Jeff Schuster, president of global forecasting at LMC Automotive.

“I think we’re missing some of the story,” Schuster said. “Obviously, they’re an extremely small player, and there are a lot of questions.”

GM in March idled Lordstown, which made the Chevrolet Cruze compact sedan, as part of a massive restructuring. Lordstown and Oshawa are two of five North American plants that GM in November said it would idle this year and potentially close to reduce overcapacity.

GM has been working to transfer laid-off workers or assist in finding them other jobs. As of last week, it said more than 1,350 employees from Lordstown and other plants have accepted transfers.

Workhorse plans
Many Ohio politicians and industry onlookers were optimistic about the possible deal but also cautious.

Lordstown, at 6.2 million square feet, has annual capacity of 410,000 units, according to LMC Automotive — a massive order for a cash-strapped company to fill.

Workhorse last week reported first-quarter sales of $364,000, down from $560,000 in the first quarter of 2018 but up from just $21,000 in the fourth quarter. It had a net loss of $36.5 million in 2018, bringing its total losses since February 2007 to $141.6 million, according to last year’s annual filing with the U.S. Securities and Exchange Commission.

In late March, reported that Workhorse was, because of its financial difficulties, postponing “plans for an electric pickup and aircraft to focus on battery-powered lightweight vans.”

But Burns, in a statement, said the first vehicle built by Workhorse at Lordstown would be a commercial electric pickup. It would be separate from an electric pickup that CEO Mary Barra confirmed GM was working on, according to a source familiar with the plans.

A GM spokesman said it’s “too early to say whether or not GM would” invest in the entity led by Burns. Spokespeople on both sides of the discussions described the potential deal as “straightforward” with no investment commitment from GM.

Tom Colton, an investor-relations representative for Workhorse, described the talks as “preliminary” but “progressing quite nicely.”

Union pushback
The UAW expressed opposition to a sale, saying GM should instead allocate a new vehicle to the plant and reopen it. UAW Vice President Terry Dittes, who heads the union’s GM department, also had no praise for the automaker’s separate announcement of a $700 million investment and 450 new jobs at three smaller plants in Ohio.

“The UAW’s position is unequivocal,” Dittes said in a statement, citing a federal lawsuit the union filed against GM over the decision to idle Lordstown and propulsion plants in Michigan and Maryland. “General Motors should assign a product to the Lordstown facility and continue operating it.”

Most of the $700 million investment in Ohio will occur this year, a company spokesman said, while the hiring will occur through 2021.

GM, as part of its national contract with the union, must negotiate any plant closure or sale with the UAW. Those conversations are expected to ramp up in July, ahead of the Sept. 14 expiration of the union’s contracts with each of the Detroit 3.

“Jobs are jobs, and the UAW wants to keep their membership up,” said Kristin Dziczek, vice president of industry, labor and economics at the Center for Automotive Research. “They want the best and highest use of an assembly plant, and that’s assembling vehicles.”

Workhorse is open to employing union labor, Colton said, but the company’s current manufacturing operation is not unionized.

Canada deal
GM said its plans to invest $170 million Canadian ($126 million) to support the transition of Oshawa Assembly. The automaker also said it would convert part of the plant property into a test track for autonomous and advanced technology vehicles.

GM Canada President Travis Hester said during a news conference with Unifor President Jerry Dias that the plant will focus on “parts manufacturing, sub-assembly and other miscellaneous activities for GM and other auto industry customers.”

Oshawa produces the Cadillac XTS and Chevrolet Impala sedans, models that will be phased out of GM’s lineup amid slumping North American car sales. The plant also does final assembly on previous-generation Chevrolet Silverado and GMC Sierra pickup bodies shipped from Indiana.

Dias told Automotive News Canada that GM has 10-year commitments to build parts such as quarter panels, trunks, doors and hoods at the plant. He also said the company is working with suppliers including Magna International Inc. and Martinrea International Inc. to “bring in stamping work” to Oshawa.

“It starts off really low, but then it builds over time,” Dias said. “There will be a lot more [jobs] by the time December rolls around. It’s all a question of stages. They’re going to bring some work from overseas back. Everybody’s at it, but the problem is we need to make some sort of announcement. But it’s not complete. It’s a work in progress.”

John Irwin contributed to this report.

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