Additional week added to Lordstown extended shutdownPublished: 5/26/17 @ 12:00
By Kalea Hall
To align supply of the Chevrolet Cruze with demand, another week in July of production downtime has been added at the General Motors Lordstown Assembly Complex.
Now, the plant will have its two-week scheduled vacation shutdown at the end of June, and then have three weeks of an extended shutdown in July.
“General Motors has learned from their past, and they’ve adjusted to how they’ve run their business to build cars for the field supply to demand,” said Robert Morales, president of United Auto Workers Local 1714.
Earlier this year, GM announced it would have several production down weeks in 2017 to align supply with demand as compact cars are falling in the shadows of sport utility vehicles and truck sales. In March, the plant had a three-week shutdown. In January, the third shift was cut, leading to more than 600 layoffs on the assembly side and about 235 on the fabrication side.
UAW Local 1112 and Local 1714 recently announced they were able to talk with the company to prevent a slowdown of the assembly line, which would have led to more layoffs. The slowdown was to happen when workers came back from the extended shutdown in July.
“The downward trend for cars is a much greater downward trend than the overall industry,” said Jack Nerad, executive editorial director and executive market analyst for Kelley Blue Book. “Our expectation is the market will continue to favor taller vehicles, at least until we see some change in fuel prices.”
Nerad explained that if automakers do not adjust their supply to demand, it will lead to several negatives for the company and the car.
“You have to do whatever you can to sell those vehicles because you need cash flow,” he said.
The increased need to sell will lead to higher incentives, which means the company makes less profit on the car and the car is less valuable.
There’s also a concern for the value of cars when they come back on the market “because if there’s a glut of 2-year-old Cruzes, that would lower the value,” Nerad said.
Nerad, who has 30 years of experience in the industry, said there are times when automakers keep an eagle eye on inventory levels.
“They have to stay profitable,” he said.
Kelley Blue Book analysts project May compact car sales will drop 4.6 percent year-over-year to 206,000. Sales of compact sport utility vehicles, however, are expected to increase 4 percent to 275,000.
The compact-car segment still remains the second largest by sales volume out of five segments total.
“It’s a big segment,” Nerad said. “Every vehicle manufacturer makes one. There’s so many of them out there. It’s such a mainstay segment.”
Despite the trend of consumers getting in utility vehicles, the Cruze has seen sales increases.
The Lordstown-built Cruze’s April 2017 sales came in at 17,537, up from 14,153 sold in April 2016. Including the 3,780 Mexico-built Cruze Hatchback models sold, a total of 21,317 Cruzes were sold in April 2017.
“We have been advising people that it is a really good time to buy a compact sedan,” Nerad said.