“At the end of the day, Mary Barra is doing what’s best for GM,” said Jeff Schuster, analyst with LMC automotive. Schuster tracks the capacity utilization rates of automakers, a factory’s potential productivity versus what it’s actually producing. The higher the rate, the better. An auto plant running just one 8-hour shift a day, as Lordstown has been doing, has assembly lines sitting idle the other 16 hours of the day. Wasted production time and can be costly if the plant stays under utilized for an extended period of time.
On paper, GM’s decision to idle the Lordstown plant and four other facilities makes sense and will help GM’s bottom line by cutting costs. Schuster says GM will still trail competitors when it comes to plant efficiency, but calls closing these plants “a step in the right direction.” CNBC reached out to General Motors for a comment about the automaker still having too much capacity in North America.
Last year, GM’s capacity utilization rate in North America was among the worst in the industry at 73 percent. Ford‘s factories were producing at 82 percent of capacity, Fiat Chrysler‘s were working 90 percent, Honda at 91 percent and Toyota at 93 percent, according to LMC Automotive.
Over the next seven years, Schuster expects GM’s capacity utilization rate in North America to steadily climb higher and reach approximately 86 percent by 2026. That trend, along with GM’s focus on boosting profit per vehicle, that has Wall Street convinced that Barra and her team are making the right moves.
Of course, it does little to ease the pain for many in Lordstown. The assembly plant — critical to the economy in northeast Ohio — is taking with it more than 1,300 jobs. Approximately 417 of those workers will transfer to jobs at other GM plants around the Midwest according to the automaker. The remainder will either retire or be laid off.
“We know how devastating that is for the workers, for their families, for local businesses, for the entire community. We also know it doesn’t have to be this way,” Sen. Sherrod Brown, D-Ohio, said in pushing legislation that pays tax credits to consumers who buy American-made vehicles and penalizes automakers that ship jobs overseas.
As for the actual plant in Lordstown, what happens to the shuttered facility is unclear. It’s possible another automaker or a start-up could eventually buy it from GM. The land and buildings could also be sold to another industrial firm or a combination of companies could repurpose the space to fit their needs. “There’s no telling what will happen to the Lordstown plant,” said Schuster. “It could ultimately be bought by a Chinese automaker or a start-up we haven’t even heard much about.”
Source : CNBC
