GM criticized for plan to raise US production

Detroit Free Press

DETROIT — The new General Motors Co. is showing some old GM traits, according to industry analysts who question the Detroit automaker’s plans to increase North American production next year by about 45 percent.

GM has announced it plans to build about 2.8 million vehicles next year in North America.

That’s well below the number of vehicles GM built in 2008 but about 1 million more than the company expects to assemble this year.

When an automaker builds more cars and trucks than consumers want — as GM has done in the past — it is forced to discount the vehicles, which cuts into profits. Some experts wonder if GM is doing that again.

“I don’t see what they’re thinking,” Dave Cutting, senior manager of North America forecasting at J.D. Power and Associates, said of GM’s new production schedule.

Michelle Krebs, a senior analyst at Edmunds.com, said GM’s production schedule seems overly optimistic and observed: “I’m seeing a little bit of shades of the old GM.”

GM points out that the increase will come after an incredibly low year of production — the automaker expects to build about 1.9 million vehicles in North America in 2009.

“It’s clearly not the old GM, because we don’t have overcapacity, which is what caused the problem before,” John McDonald, a GM spokesman, said. “If you look at the analysts’ own reports, we’re probably being conservative to middle-of-the-road as to where the industry is going to be.”

Mark LaNeve, outgoing vice president of U.S. sales at General Motors Co., described the automaker’s decision to boost production plans next year by 45 percent as “real simple math.”

As GM underwent sweeping restructuring this year, including a trip through bankruptcy, the company slashed its inventory by 500,000 vehicles.

“That’s the biggest factor,” LaNeve said of the need to increase production dramatically next year. “The second biggest factor is we think the industry will be up 15 percent and that we’ll hold our share.”

Combine those two things and, LaNeve said, GM will get “an increase without really being optimistic about gaining share or anything of that nature.”

GM, which saw record inventory lows in September, says it believes it will need more vehicles next year to avoid losing out on sales because of lack of product.

Analysts interviewed by the Detroit Free Press agreed GM should see sales increases next year over 2009’s dismal levels — GM’s sales were down 36.3 percent through September.

Increased sales should, of course, lead to increased production requirements.