Analysts: Layoffs at GM to last till 2010

By Don Shilling

GM’s operations will be threatened soon if it doesn’t receive help from the government.

Sagging car sales will prolong the Lordstown layoffs for some time, industry analysts said.

The General Motors small-car plant probably won’t need its full complement of workers until the Chevrolet Cruze is launched in the summer of 2010, said Stephanie Brinley, analyst with AutoPacific, Southfield, Mich.

GM said Friday that 1,060 hourly workers in Lordstown will be laid off Jan. 20, and about 50 salaried jobs are being cut.

Brinley’s firm predicts that car sales will be lower in 2009 than they were this year as the nation’s economy continues to struggle. Sales are expected to rebound some in 2010 but still fall short of this year’s number.

She added, however, that the Cruze appears to be a high-volume car that GM can make money on. It is being designed to replace the Chevrolet Cobalt now made in Lordstown.

John Wolkonowicz, an analyst with Global Insight Inc. in Lexington, Mass., said he also thinks mid-2010 is a likely date for the Lordstown complex to recall its workers.

Besides depressed sales in general, falling gasoline prices have sapped demand for the Cobalt, he said.

“Fundamentally, Americans do not want small cars. They buy them only when they have to,” he said.

Cobalt sales in the U.S. fell 60 percent in October, while GM’s sales overall declined 45 percent.

The success of the Cruze will largely depend on gas prices in 2010, Wolkonowicz said.

“If prices go up, the Lordstown stuff will be like gold,” he said.

The big question is whether GM can raise the cash it needs to make it to 2010, analysts said.

GM’s best hope of keeping its operations going is to receive loans from the federal government, the analysts said.

Credit markets remain largely frozen, and GM’s credit rating is too low to raise capital, Wolkonowicz said.

“The only way they are going to get any money is from the federal government,” he said.

GM said Friday that it has been losing so much money that is close to having the minimum amount of cash needed to fund its daily operations. Wolkonowicz said GM is expected to reach that level sometime between December and early 2009.

Brinley said the government loans would only provide enough cash for several months of operations at the company’s current spending rates, so it must adopt cost-saving measures and hope that credit markets ease.

Wolkonowicz said it remains to be seen whether Congress and the president will approve the loans because they are getting pressure from the public not to help the auto industry. Much of the nation fails to understand how widespread the economic damage would be from a collapse of the domestic auto industry, he said.

Besides, the automakers aren’t asking for a bailout but loans that the government could make money on, he said.

GM executives said Friday that they are doing everything they can to avoid a bankruptcy filing.

Even so, Wolkonowicz said a bankruptcy could help GM in the long run because it could pare down its operations, including dropping brands and dealers. Remaining production could be moved to Mexico, where it would not be unionized, he said.

In the meantime, it remains to be seen how the layoffs at GM will affect other companies in the Mahoning Valley. Suppliers to Lordstown employ several hundred workers in the area, and other companies supply other auto plants as well.

GM said it is slowing down the assembly line at Lordstown in January, going from 1,500 cars a day to 1,100. It also is making cuts at other plants, including 3,600 layoffs nationwide.

Delphi Packard Electric operations in the Mahoning Valley likely will be affected by the slowdown at GM, said Mike O’Donnell, shop chairman of International Union of Electrical Workers Local 717. Suppliers will know within the next two weeks how much less production that GM will require of them, he said.

Packard has about 750 hourly workers in the area that make components for vehicle wiring harnesses.

About 290 former Packard workers went over to GM when Lordstown was adding a third shift this past summer. GM added 1,400 jobs.

One worker said the first wave of Packard workers who went to GM are not being laid off, while others who went over later in the summer are being furloughed.

GM is cutting the workers with the least seniority. O’Donnell said the former Packard workers did not have any seniority at GM in terms of layoff rights, but they retained their seniority for retirement and benefit considerations. Packard used to be part of GM before Delphi Corp. was split off as a separate company.

O’Donnell said, however, that he thinks the former Packard workers who are being laid off still made the right move in going to GM.

A worker with at least one year of experience at GM or Packard will receive state unemployment benefits and supplemental benefits from GM that equal about 85 percent of their pay. And, they will receive health-care benefits.

They receive the state benefits for 48 weeks, and then they would be put into GM’s “jobs bank,” which continues to pay them even though they aren’t working.

O’Donnell said the workers also keep the recall rights at GM, which looks promising with the coming of the Cruze. Plus, Packard production workers had their pay cut to $17 an hour, while longtime workers at GM continue to make $29 an hour.

shilling@vindy.com