GM Schedules Additional Plant Downtime Amid Soft Sales, Inventory Glut -- Update
General Motors Co. will extend the typical summer shutdown at certain U.S. factories to deal with slumping sales and bloated inventory, a sign the industry's hot streak is grinding to a halt.
The No. 1 U.S. auto maker in terms of sales will idle its Chevrolet Malibu factory near Kansas City for five weeks starting in late June, Vicky Hale, president of the United Auto Workers Local 31, said. Job cuts will be needed if GM is forced to slow assembly-line speeds when those workers return.
Additional downtime is also slated in Lordstown, Ohio, a small-car factory already stung by deep layoffs related to a pullback in demand for passenger cars. A GM spokesman declined to comment on specific plans.
Auto makers traditionally schedule two-week factory breaks in mid summer, often to prepare for model changeovers. The pace of car sales, however, is slipping after seven years of record sales and most major car companies have responded by curtailing output ahead of summer months that usually are the busiest for the industry.
Ford Motor Co. has also announced production slowdowns at certain plants. While Ford's trucks are selling at a brisk pace, its sedans are growing increasingly unpopular as gasoline prices remain low.
GM enters the summer with a glut of unsold inventory after running production lines at relatively high rates to prepare for factory downtime related to plant upgrades. WardsAuto.com estimates GM's production increased 2.9% over the first four months of 2017, even as the broader industry pulled back.
As a result, GM's inventory spiked 43.5% at end of May compared with the prior year. It has nearly 1 million vehicles sitting on dealer lots, WardsAuto.com estimates, representing 101 days' worth of supply, or 23.4% of total industry stock.
GM's holds about 17% market share. It is emerging from a tough May when Ford -- traditionally the No. 2 seller -- took a rare lead in the overall market due to its strong truck sales.
Write to Mike Colias at Mike.Colias@wsj.com
General Motors Co. will extend the typical summer shutdown at certain U.S. factories to deal with slumping sales and bloated inventory, a sign the industry's hot streak is grinding to a halt.
The No. 1 U.S. auto maker in terms of sales will idle its Chevrolet Malibu factory near Kansas City for five weeks starting in late June, Vicky Hale, president of the United Auto Workers Local 31, said. Job cuts will be needed if GM is forced to slow assembly-line speeds when those workers return.
Additional downtime is also slated in Lordstown, Ohio, a small-car factory already stung by deep layoffs related to a pullback in demand for passenger cars. A GM spokesman declined to comment on specific plans.
Auto makers traditionally schedule two-week factory breaks in mid summer, often to prepare for model changeovers. The pace of car sales, however, is slipping after seven years of record sales and most major car companies have responded by curtailing output ahead of summer months that usually are the busiest for the industry.
Ford Motor Co. has also announced production slowdowns at certain plants. While Ford's trucks are selling at a brisk pace, its sedans are growing increasingly unpopular as gasoline prices remain low.
GM enters the summer with a glut of unsold inventory after running production lines at relatively high rates to prepare for factory downtime related to plant upgrades. WardsAuto.com estimates GM's production increased 2.9% over the first four months of 2017, even as the broader industry pulled back.
As a result, GM's inventory spiked 43.5% at end of May compared with the prior year. It has nearly 1 million vehicles sitting on dealer lots, WardsAuto.com estimates, representing 101 days' worth of supply or 23.4% of total industry stock.
GM's holds about 17% market share. It is emerging from a tough May when Ford -- traditionally the No. 2 seller -- took a rare lead in the overall market due to its strong truck sales.
Workers at GM's car plants, including the 2,850 employees at the Malibu plant near Kansas City, are feeling the brunt of the pain. GM earlier this year cut thousands of jobs to counter falling sales of family sedans and smaller cars.
The Lordstown plant, which already cut a shift of production earlier this year, will close for three weeks in July to lessen supply Chevy Cruze, said Robert Morales, president of a United Auto Workers local that represents some Lordstown factory workers.
A preference for trucks is only part of the industry's problem.
People are now returning an increasing amount of sedans to dealerships as leases expire. That has created ample supply of cheap, late-model used cars, making new cars even tougher to sell.
Tommy Brasher, a Chevy dealer in Weimar, Texas, said his Malibu inventory is "a little heavy" and business has slowed across-the-board in recent months.
"We just haven't been seeing much foot traffic or internet traffic," he said. "April was slow, May was worse and June started the same."
Wall Street analysts have said concerns about the market have weighed on GM's stock price, prompting investors to wait and see how the auto maker weathers the next downturn. RBC Capital estimates GM could slash up to $1 billion in annual labor costs if U.S. sales were to slip 20%.
GM executives expect an uptick in the second half of 2017, and as recently as April said sales will match the record 17.5 million light vehicles sold in 2016.
The auto maker, however, has said more flexible union contracts signed over the last decade give it more wiggle room. Nearly one-third of GM's hourly U.S. hourly workforce, for instance, can be let go at relatively little cost.
In the past, "the manufacturing cost was very sticky," GM Chief Financial Officer Chuck Stevens told analysts in April. "That's not the case now."
GM built up stocks of pickup trucks and some crossover SUVs in the first half of the year ahead of some factory closures in the second half to prepare for new models. Factory downtime will dent third-quarter results.
Weak sedan sales could add further pressure.
GM had expected to boost profitability by offering improved versions of the Malibu and Cruze, which have received accolades from automotive critics since rolling out over the last 18 months. But an incentive war has forced price reductions in the segment.
Write to Mike Colias at Mike.Colias@wsj.com
(END) Dow Jones Newswires
June 14, 2017 10:20 ET (14:20 GMT)