General Motors (GM) has announced plans to invest USD5.4 billion over the next three years in its US plants and manufacturing infrastructure, while revealing the impact on the Oshawa plant in Canada of moving production of the Chevrolet Camaro to the US.
IHS Automotive perspective | |
Significance | GM has announced that it will invest USD5.4-billion in its US plants over the next three years. In the announcement, GM identified projects for the first USD783.5 million of the investment. At the plant in Oshawa, Canada, GM is closing one shift and looking to eliminate 1,000 jobs, first by offering retirement packages. |
Implications | GM's planned investment is expected to support new product programmes at several US plants, as well as prepare the plants for products beyond 2018. The production pullback in Oshawa, Ontario, is related to the planned move of manufacture of the Chevrolet Camaro to Lansing Delta Township in November. |
Outlook | While GM has not set out the full impact of the investment, IHS expects it will support several key new-product programmes entering production between 2015 and 2018, as well as update existing facilities. |
General Motors (GM) announced changes to be made to operations at its US and Canadian production facilities at a press conference in Pontiac, Michigan, United States, yesterday (30 April). The company is investing USD5.4 billion in improvements at its US plants over the next three years. Speaking at the Pontiac Metal Center, GM North America president Alan Batey said, "These investments are evidence of a company on the move, strategically investing in the people, tools and equipment to produce cars, trucks and crossovers that are built to win in the marketplace, with stunning design, quality and breakthrough technologies."
GM said USD783.5 million of the total investment would be spent on facilities in the state of Michigan. This comprises USD124 million at Pontiac Metal Center, Pontiac; USD520 million at Lansing Delta Township assembly plant, Lansing; and USD139.5 million at pre-production operations in Warren. GM said it will detail plans for the remaining USD4.6-billion investment over the next several months. According to an Automotive News report, GM has spent USD16.8 billion on its plants since June 2009, when it exited bankruptcy, a figure that averages USD2.8 billion per year. The announced new investment would involve an average of about USD1.8 billion per year, and could suggest GM is decelerating its rate of manufacturing investment in the near term.
GM indicated that the Lansing Delta Township investment will mean the retaining of 1,900 jobs and will include investment in tooling and equipment for future new vehicle programmes. The investment at the Warren facility will include a new body shop and stamping plant upgrades. The investment at Pontiac Metal Center will include a 100,000-square-feet building addition and a new dedicated press for secondary try-outs on extra-large dies. According to a GM company spokesperson, this will allow pre-testing of all major body panel dies under regular production conditions, enabling stamping plants to produce quality parts in roughly one-third the time.
In a separate statement, GM Canada confirmed production changes first announced in December 2012, and offered retirement incentives to workers at the Oshawa, Ontario, plant. One production shift will end and the incentives are to help reduce the workforce there by about 1,000 in 2015. GM Canada says the plant currently employs about 3,600 hourly workers, with 2,100 eligible for retirement incentives.
The planned employee cuts at Oshawa are related to the ending of production of the Chevrolet Camaro at the plant on 20 November. Oshawa assembly plant will continue to build five vehicles, and will move to three shifts between its Flex and Consolidate lines. Currently, the Flex line (Chevrolet Impala and Camaro, Buick Regal, and Cadillac XTS) is on three shifts, and it will drop to two shifts. The Consolidated line (Chevrolet Equinox and Impala Limited) will continue on one shift. Production of the next-generation Camaro is moving to the Lansing Grand River plant in Michigan, US.
As to the future of Oshawa, a decision is still pending. In its statement, GM said, "GM Canada continues to examine a range of longer-term opportunities and competiveness enhancements for Oshawa Assembly working with Unifor, government, supplier and community partners to ensure our operations are as innovative, efficient and cost competitive as they can be. Future product decisions will not be made until after Unifor national bargaining, scheduled for 2016."
GM will make restructuring charges of about USD200 million on the changes, mostly in the second quarter, and were included in the USD700 million of restructuring charges in GM's EBIT forecast for its full-year 2015 results.
Additionally, the Detroit News has reported that GM's request for a tax abatement from the City of Warren, Michigan, in support of an update of its USD419.4-million expansion and update of its Warrant Tech Center campus has been approved. The city approved three abatements that would each last 14 years, including the period of construction, and could help the company realise nearly USD97.1 million in property tax savings. It is unclear whether this project is included in the USD5.4-billion figure, as GM has not yet formally announced details of the project.
Outlook and implications
GM's investment in US plants is expected to support new products at its Detroit-Hamtramck, Lansing Grand River, Fairfax, Lordstown, Spring Hill, Orion, Lansing Delta Township, and Bowling Green plants, as each of these will begin production of new generations of models over the next several years. Additionally, there have been reports of GM's intention to update its Arlington facility, which builds popular and profitable full-size sport utility vehicles (SUVs), and that investment may be included in the USD5.4-billion total investment announced (see United States: 9 April 2015: GM considers USD1.3-bil. expansion of Arlington plant).
Overall, including current and future programmes, the plants most likely to receive the benefit of this investment are forecast to deliver more than 1.00 million units of GM's US production in 2015, nearly half of the 2.13 million units the company is forecast to build this year across 12 US plants. That figure of 1.00 million is forecast to grow to 1.28 million units in 2018, with the expansion including products being shifted from other plants to these facilities, as well as some new product entries. With the USD5.4-billion investment GM has announced will come other investments to support the planned production, as well as position the company for future production. As demonstrated by the investment in Pontiac Metal Center and the pre-production operations in Warren, some of the expenditure will be to support manufacturing facilities, as well as assembly plants.
IHS Automotive forecasts GM will begin production in 2015 of the next-generations of the Chevrolet Volt at Detroit-Hamtramck, with start of production (SOP) in July; the Chevrolet Camaro at Lansing Grand River, with SOP in October; the Malibu at Fairfax, Kansas, with SOP in November; and the Cadillac CT6 at Detroit-Hamtramck, with SOP in November. Of those four products, the Malibu is the most significant for GM's production volumes, being forecast at nearly 245,000 units in 2018. The Camaro's production is forecast at about 111,200 units in 2018. The Chevrolet's new Volt is forecast to see slightly better fortunes than the outgoing car, and production is expected to reach 40,600 units in 2018. Combined, these vehicles will result in production of about 410,600 units in the US in 2018.
Programmes due begin production in 2016 include the next generations of the Chevrolet Cruze (Lordstown, SOP January), Buick LaCrosse (Detroit-Hamtramck, SOP May), Cadillac SRX and GMC Acadia (Spring Hill, SOP April and May), and Chevrolet Bolt (Orion, SOP October). The Cruze will also go into production at GM's Ramos Arizpe facility in 2016, but as the investment tally announced does not include plants outside of the US, so we have not included it in this summary. By 2018, these products are forecast to see production of more than 495,000 units, a drop from 2017's projected 513,000 units. The Cruze is the highest volume product, at 244,000 units in 2018, followed by the GMC Acadia at nearly 104,000 units after three years. The Cadillac SRX is forecast to see production volume of 63,600 units in 2018. The LaCrosse will see production of 60,000 units, while the EV-only Bolt well see production of nearly 24,000 units in 2018.
In 2017, the number of new products going into production in the US is expected to reach four or five. Among them will be a Cadillac flagship, referred to as E-Sedan XL in our forecast and expected to go into production in July 2017 at the Detroit-Hamtramck plant. The other three new programmes going into production in 2017 are the replacements for the Buick Enclave and the Chevrolet Traverse (both at Lansing Delta Township, with SOP in about April 2017) and a D-CUV for Chevrolet expected in about July 2017. A fifth potential new US-produced vehicle for 2017 may be a super Corvette, sometimes referred to as the Corvette Zora, and would be very low volume. The Zora programme is uncertain, however, and is not yet reflected in the IHS production forecast. These new products would see their first full year of production in 2018, and impact on GM's US output for the year by about 259,000 units.