Car market collapse outruns GM moves to keep up

[DETROIT] General Motors Co's monumental announcement on Monday that it will close three car assembly plants in North America and slash its workforce will only partially close the gap between capacity and demand for the automaker's sedans, according to a Reuters analysis of industry production and capacity data.

Sales of traditional passenger cars in North America have been declining for the past six years and are still withering. After GM ends production next year at factories in Michigan, Ohio and Ontario, it will still have four US car plants, all operating at less than 50 per cent of rated capacity, according to figures supplied by LMC Automotive.

In comparison, Detroit-based rivals Ford Motor Co and Fiat Chrysler Automobiles NV will have one car plant each in North America after 2019.

The Detroit Three are facing rapidly dwindling demand for traditional passenger cars from US consumers, many of whom have shifted to crossovers and trucks. Passenger cars accounted for 48 per cent of retail light-vehicle sales in the United States in 2014, according to market researchers at J.D. Power and Associates. This year, sedans will account for less than a third of light vehicle sales.

That shift in turn has left most North American car plants operating far below their rated capacities, while many SUV and truck plants are running on overtime.

The collapse in passenger-car demand is a challenge for nearly all automakers in the United States, including Japan's Toyota Motor Corp and Honda Motor Co Ltd, which have the top-selling models in the compact and midsize car segments. Toyota executives said last month they are evaluating the company's US model lineup. But Toyota also plans to build compact Corolla sedans at a new US$1.6 billion factory it is building in Alabama with partner Mazda Motor Corp.

The obstacles facing GM in its plans to close more auto factories became apparent on Tuesday as US President Donald Trump threatened to block payment of government electric vehicle subsidies to GM. While it is not certain that Mr Trump unilaterally has the power to do that, he made it clear he intends to use his office to pressure the company to keep open a small car plant in Ohio that GM says will stop building vehicles in March.

Asked whether GM's plans to close factories and cut jobs might not solve the demand problem for its sedans, GM spokeswoman Kimberly Carpenter said on Tuesday: "We continuously look at our operations for opportunities to improve our efficiency and capacity utilization. We believe the actions announced yesterday move us in the right direction and we will continue to monitor the market and consumer trends and adjust accordingly."

GM executives have said they do not intend to abandon cars to the extent that Ford and FCA have. GM car plants that will remain open include Fairfax, Kansas, which builds the Chevrolet Malibu and Cadillac XT4 compact SUV. But that plant is operating at 48 per cent of capacity, well below the 80 per cent that GM Chief Executive Mary Barra is targeting as the average for North America.

REUTERS