GM to Idle Detroit Car Factory Amid Slow Demand

By Mike Colias Features Dow Jones Newswires

General Motors Co. plans to close a Detroit factory through the end of the year and deepen production cuts to slow-selling cars the plant manufactures, idling some workers and letting go others around the holiday season in response to weak sales.

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GM will temporarily close its Detroit-Hamtramck assembly plant for about six weeks starting in mid-November, said people familiar with the plan. The move will lay off roughly 1,500 workers who help build four low-demand models at the plant.

The nation's largest auto maker also plans to scale back the factory's assembly line to produce roughly 20% fewer vehicles once the plant resumes operations, costing about 200 workers their jobs, the people said.

A GM spokesman declined to comment.

The expected move comes after GM already laid off several hundred employees at the Detroit-Hamtramck factory earlier this year by eliminating the evening work shift. GM, like other auto makers, is revising production plans amid cooling U.S. vehicles sales, punctuated by a sharp contraction in the market for passenger cars. Consumers are opting for larger and more versatile sport-utility vehicles that are proving attractive amid low prices at the fuel pump.

The upshot is dealer lots are packed with compact and midsize sedans that were staples of the U.S. auto market a few years back. GM, saddled with more factories that make only passenger cars than competitors, has moved aggressively to realign production amid the shift in consumer tastes.

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The Detroit-Hamtramck plant, which straddles the border of the Motor City and its smaller neighbor, is GM's least productive assembly factory in North America, according WardsAuto.com. Even with cuts earlier in the year, further sales slumps for the models built there precipitated the expected idling and production cut.

Over the past year, GM has slashed passenger-car output, resulting in nearly 3,000 laid-off workers overall. Some have been transferred to busier plants making SUVs or components.

The 32-year-old Detroit-Hamtramck factory has been hit especially hard. Workers there build four nameplates, including the small Chevrolet Volt plug-in hybrid and the Cadillac CT6, a large sedan introduced last year as the luxury brand's flagship car. Sales of each have generally fallen sharply in recent months, leading to inventory piling up at dealerships.

Dealers are sitting on a roughly 10-month supply of the Buick LaCrosse, for instance, another car built at the plant, according to WardsAuto.com. A two-month supply is considered healthy.

The cars are struggling to attract buyers despite GM recently redesigning most of them. Fresh sheet metal typically translates into stronger sales. Critics lauded the CT6 as on a par with German luxury cars, but sales are nonetheless falling short of GM's goals.

GM executives repeatedly have said they would cut output to align with demand, even though the reduced production hurts revenue. Car companies book revenue when they ship vehicles to dealerships, and GM had long been criticized for cranking out too many cars that required steep discounts to sell.

GM finance chief Chuck Stevens told analysts in July that the company is "committed to take action on passenger cars, which we have done and will continue to do as required to align supply and demand."

Write to Mike Colias at Mike.Colias@wsj.com

(END) Dow Jones Newswires

October 12, 2017 08:32 ET (12:32 GMT)