General Motors is will likely cut about 500 jobs at the Pontiac, Michigan plant where it produces the Chevrolet Silverado and GMC Sierra pick-up trucks. One hundred full-time workers would be laid-off in September, but retain pay benefits during lay-off under the “jobs bank” provisions of the union contract and would be offered relocation. 

The remaining 400 jobs cut would be from the ranks of temporary workers. These “temporary” workers were hired to replace workers who had accepted last year’s GM worker buy-out program, a plan that almost 35,000 GM workers accepted. The temporary workers are union members, but are paid less and are not eligible for benefits.
Eliminating these jobs would reduce the plant’s production by approximately 17%. It comes on the heels of a planed elimination of 3,600 jobs at the Pontiac facility which was instituted last fall.
GM invested $163 million in the plant to build the new trucks. The plant accounts for about a fifth of the GM light truck production, and built over 143,000 trucks last year. The workforce reduction does not affect the other GM plants which assemble trucks: Flint, Michigan, Fort Wayne, Indiana, Oshawa, Ontario, and Silao, Mexico.
Though the GM pick-ups are one of the newest designs on the market and have actually increased their market share this year, despite Toyota’s introduction of a new Tundra, the trucks have never hit the sales targets for which GM had originally planned. Overall, the pick-up market has softened, primarily due to uncertainty about future petroleum prices, but also due to slower economic growth in the housing and construction industries. The planned reduction in plant output appears to be an acknowledgement that the softening in the market is unlikely to change soon and unable to be offset with incentives.
General Motors has offered $1000 incentives on its pick-up trucks. Toyota, however, is offering $2000 on the Tundra and Ford and Dodge are also offering lavish incentives: up to the equivalent of 20% of the manufacturer’s suggested retail price. General Motors’s truck sales have dropped only about 2%, less than the industry average of 3%, despite offering less in incentives. 

The decision to ramp down production is consistent with GM’s previously announced intention of reducing its dependency on incentives to sell vehicles. Incentives have been criticized because they ultimately damage the resale value of the product, ultimately making the product less competitive than it might have been otherwise.

Though GM has offered a so-called “mild hybrid” option on its pick-up trucks, it adds $1500 to the price of an equivalent non-hybrid truck in exchange for a modest ten percent improvement in fuel economy. Moreover, the hybrid model has a starting price of $29,900 –almost twice the base price of the standard Silverado pick-up and GM’s most expensive pick-up truck. For some reason, the hybrid option has not proven popular with buyers. 

Source: Detroit News

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