GM’s potential Lordstown sale draws scrutiny
GM’s potential Lordstown sale draws scrutiny
Nora Naughton, The Detroit NewsPublished 1:00 p.m. ET May 13, 2019
Amy Drennen, right, of Lordstown, Ohio, an employee at General Motors for 12 years, receives a hug from Pam Clark, as people gather in front of the General Motors assembly plant, Wednesday, March 6, 2019, in Lordstown, Ohio. Wednesday is the last day of the plant’s Chevrolet Cruze production, a move that will eliminate nearly 1,700 hourly jobs and idle the plant. (Photo: Steph Chambers, AP)
Brian Milo isn’t impressed with a potential sale of his hometown plant to electric-vehicle start-up Workhorse Group Inc.
Jaded by nearly a year of unemployment, the laid-off General Motors Co. line worker also isn’t impressed by the political fanfare and a presidential tweeting last week celebrating a possible fresh start for the automaker’s Lordstown Assembly in Ohio.
“I’d rather see GM invest in Lordstown and repay us for how we bailed them out,” Milo said. But “if they feel that they are not going to utilize Lordstown, I’d like to see a viable company use the facility.”
Milo, who voted for Trump in 2016, isn’t alone in his skepticism about the plans. In the days following President Donald Trump’s tweet and GM’s announcement, Workhorse’s “viability” is a shared concern for some Lordstown workers, union leaders and industry experts, who cite its shaky financial condition. But GM, according to people familiar with the talks, was ready to make its negotiations with Workhorse public prior to the president’s tweets — a decision not made lightly.
Brian Milo of Warren, Ohio, makes cupcakes for his 5-year-old daughter on Wednesday, Feb. 27. Milo was laid off from the GM Lordstown plant in June, and is now studying at a local trade school. (Photo: Phil Long, Ohio Press Photo System, Special to The Detroit News)
The Detroit automaker, amid a global restructuring and nearing contract negotiations with the United Auto Workers, says it won’t assign a new vehicle to the plant. And the most desirable alternative is finding another automotive manufacturing operation.
“In repurposing a plant, the best and highest use of an automotive assembly plant is automotive assembly,” said Kristin Dziczek, vice president of Ann Arbor-based Center for Automotive Research. “The next best use is manufacturing of any kind, but it doesn’t have the same impact on job creation and the economy.”
GM has been in talks with interested buyers for months, with Workhorse approaching the company in January, according to a person familiar with the talks. Workhorse ticked all the boxes, the person said, including offering continued vehicle production — a key driver of economic development with historically high job-multiplier effects.
Workhorse’s plan, as presented last week, would be a best-case scenario for repurposing, particularly in a rural area like the Mahoning Valley, said Valerie Satche-Brugeman, a CAR researcher who co-authored reports in 2011 and 2012 on the repurposing of automotive manufacturing facilities.
“Closed factories in urban areas have a much higher chance of being redeveloped,” she said. “If the plant closes before a redevelopment plan is made, there is a very low chance it returns to manufacturing again.”
Satche-Brugeman’s 2011 report found that age plays a factor in whether a plant is repurposed, with plants under 46 years old finding the most new uses. Opened in 1966, Lordstown is 53 years old.
Two former GM assembly plants offer examples of potential fates for Lordstown.
After General Motors Baltimore Assembly closed in 2005, the property was sold to a real estate development company for $27 million. It was converted to various corporate residences and warehouse operations, a project that CAR’s report estimated would have cost the real estate developer a total of $150 million over 10 years.
GM’s former assembly plant in Moraine, Ohio, near Dayton was one of a handful closed by the Detroit automaker in 2008 as the company edged toward its federally financed bankruptcy. The plant sat empty until 2014, when a Chinese automotive glass manufacturer, Fuyao Glass Industry Group Co., purchased the plant. Fuyao started operating in the plant the following year.
In this Nov. 27, 2018, file photo, a banner depicting the Chevrolet Cruze model vehicle is displayed at the General Motors’ Lordstown plant, in Lordstown, Ohio. (Photo: John Minchillo / AP)
Workhorse’s potential manufacturing operation at Lordstown, which the company declined to detail at this early stage, would employ “hundreds” of workers to start with room for growth in the sprawling 6.2 million-square-foot assembly and stamping facility. Lordstown was employing 1,435 union-represented workers on one shift before it stopped production of the Chevrolet Cruze in March. That had diminished from more than 4,000 when the plant was operating with three shifts.
“There was also once a little start-up called Tesla building a couple-hundred electric vehicles at a huge plant in Fremont, California,” GM spokesman Jim Cain said, referring to Elon Musk’s Tesla Inc. operating out of a plant once jointly operated by GM and Toyota Motor Corp. “Workhorse has defined a similar niche in (electric) commercial vehicles; they’re one of the finalists to build new trucks for the U.S. Postal Service — there is some substance there.”
But to Jeff Schuster, an industry analyst for LMC Automotive who tracks both GM and Workhorse, the thought of Cincinnati-based electric truck-maker taking over Lordstown is “head-scratching.”
“Workhorse appears to be a very slow-moving venture that has a lot of risk, and no massive amount of funding,” Schuster said. “Lordstown is a massive facility, and despite some investments over the years, I don’t believe it would be easily converted to build electric pickups without substantial investment.”
Workhorse sees a way around that funding problem. The company plans to create an acquisition entity, of which it would be a minority stakeholder. That new entity would own Lordstown and use Workhorse technology and intellectual property to build a vehicle
Workhorse spokesman Tom Colton declined to comment on where that investment stands or to identify any potential backers.
Still, LMC estimates Lordstown would need to produce 410,000 vehicles per year to reach full capacity, the watermark for profitability. Schuster says his team estimates Workhorse’s electric pickup truck production potential between 5,000 and 10,000 trucks per year.
United Auto Workers Local 1112 President David Green, who represents union workers at GM’s Lordstown plant, says he’d rather focus on efforts by the UAW’s international leaders to pressure GM on reopening Lordstown.
The UAW is suing GM for its plans to “unallocate” Lordstown, Warren Transmission and Baltimore Operations before the current contract expires. Detroit-Hamtramck is not included in the lawsuit because its production was extended through January 2020, after the current contract expires. Union leaders, who balked at GM and Workhorse’s announcement last week, also are expected to demand a new product for Lordstown during contract negotiations this fall.
“All we have now is more drama, more anxiety,” Green said of the GM-Workhorse announcement.
GM’s Lordstown Assembly, one of five North American plants GM said it would idle as it executes a global restructuring, has become a political football for Trump. Lordstown’s surrounding Trumbull County delivered Ohio to Trump in 2016 as the former Democratic stronghold flipped Republican.
Despite the president’s celebration last week, Green says a lack of real answers is only adding to the anxiety in Lordstown.
“Nothing about that has changed,” he said. “The closer we get to contract talks, the only thing that changes is the anxiety level. It’s like having a loved one on life support and trying to decide whether to pull the plug or wait it out.”