Saturday, December 20, 2008
By Don Shilling
Analyst: Cruze will keep Lordstown plant humming
Elsewhere, GM is expected to close more plants and trim its lineup of models.
The Lordstown car complex will be part of General Motors’ future despite the plant closings and layoffs that are coming, an analyst said.
Lordstown should survive the upcoming cuts because it is scheduled to produce the Chevrolet Cruze, which is a centerpiece of GM’s plan to build fuel-efficient vehicles, said Dennis Virag, president of Automotive Consulting Group in Ann Arbor, Mich.
In granting $9.4 billion in loans to GM on Friday, President George W. Bush gave the automaker until March 31 to convince federal authorities that it can make cars and trucks profitably. Otherwise, GM will be forced to repay the money, which could push it into bankruptcy.
Virag said GM’s plan will include closing plants and trimming its lineup of models as it seeks to cut costs in a down market.
The Detroit News reported this week, however, that the Cruze and the Chevrolet Volt will be among GM’s featured products at the North American International Auto Show next month in Detroit. GM will be stressing the fuel efficiency of the future models, it said.
The Cruze is to get about 40 mpg, and the Volt is to be an electric vehicle that will go 40 miles without using gas. Both are expected to go into production in 2010.
Lordstown now produces the Chevrolet Cobalt and Pontiac G5.
Boardman car dealer Dave Sweeney said the survival of Lords- town is aided by the worldwide market for the Cruze. GM isn’t looking to recoup its engineering and tooling costs just from North American sales as it has with other models, he said.
GM has called the new compact its first global car and said expenses will be spread over its worldwide operations.
GM already has opened plants in Russia and China that will build the Cruze for the European and Asian markets. The model is to be in showrooms on those continents next year.
In order to save cash, GM this week delayed construction of a plant in Michigan that is to produce the engine for the Lordstown-built Cruze. Chris Lee, a GM spokesman, said, however, that plans to bring the Cruze to Lordstown remain on track and the automaker will bring engines from overseas if need be. The delay on the engine plant was described as temporary, however.
Virag said GM has to be careful as it develops a cost-cutting plan to satisfy Washington. Recessions cut into auto sales once a decade, but sales always bounce back and GM has to be ready for increasing sales, he said.
Vehicle sales are now running at a pace of 11 million a year, but his firm sees that jumping to 19 million by 2015. GM has to reduce production now without taking actions that would prevent it from taking part in the sales rebound, Virag said. One option would be to close plants in such a way that they could be reopened later, he said.
Sweeney, who owns Sweeney Buick Pontiac GMC and Sweeney Chevrolet with his brother, Doug, said he’s hoping the news of the loans for GM will reassure consumers that the automaker has a future. Sweeney said it’s hard to tell how reports of a potential bankruptcy of GM affected car buyers, but he thinks some of the reason GM showrooms have been quiet lately is due to consumer uncertainty.
shilling@vindy.com