Amid small-car slide, Cruze plant aims to survive

By KALEA HALL

khall@vindy.com

LORDSTOWN

The General Motors Lordstown Complex is a survivor. Market conditions change, and the plant – along with the Mahoning Valley economy – feels the impact.

Sometimes, employment levels are high, and bonuses provide boosts.

Other times, jobs are lost.

For 50 years, the plant has served as one cornerstone of the Mahoning Valley economy.

Come mid-January, 1,245 jobs will be lost as the small-car market changes again. Though this has caused concern in some corners, plant leaders are focused on staying in business.

“We have been able to survive for 50 years,” said Glenn Johnson, United Auto Workers Local 1112 president representing 3,000 assembly workers. “You can control what you can control in your own world — and make sure you are in the best position.”

Both GM and union officials are adamant that the workforce cut has nothing to do with the performance of the plant’s workers.

“The decision was based solely on the fact that we needed to adjust production to meet demand,” said Tom Wickham, GM spokesman. “In fact, we expect the Chevrolet Cruze will continue to play an important role in the Chevrolet portfolio.”

PAST TO PRESENT

The recession of 2008 brought dark times to GM and Lordstown.

In 2009, the automaker filed for bankruptcy and the federal government had to bail the company out to save thousands of jobs.

In total, GM received $49.5 billion in the auto bailout and paid back $39.5 billion before the U.S. Department of Treasury closed the books at the end of 2013.

“We are grateful for the support we received from local, state and federal governments in 2009,” Wickham said. “Since then, we have announced investments of about $20 billion in our manufacturing operations in the U.S. During that period we have announced investments of nearly $1.8 billion for our Ohio plants.”

The Chevrolet Cruze came to the Lordstown plant in 2010. It would be one of the vehicles that would help drive the company out of bankruptcy.

“When we emerged from bankruptcy, gas was $4 a gallon,” Johnson said. “We couldn’t make these fast enough. We were hiring folks and transferring folks. What a great job the entire team did.”

For Lordstown workers, the coming of the Cruze meant job security. With three shifts starting up again in 2010, the staff of 4,500 worked round the clock to produce Cruzes for the U.S. market.

In two years, Cruze sales were often better than the foreign competition.

In 2012, GM made the big announcement that it would invest $200 million at Lordstown for tooling and equipment to build the next-generation Cruze starting in 2016.

In 2014, GM announced it would invest an additional $50 million for production of the next-generation Cruze.

That year, the trend to buy small started to switch. Compact cars lost their momentum as gas prices dropped below $2 a gallon and compact sport utility vehicles became increasingly fuel efficient.

“Small car sales have been softening and we expect that to continue into 2017,” Wickham said. “With fuel prices staying in the range of $2 per gallon, consumers have been shifting their focus to crossovers and large pickups and SUVs. However, we are not going to speculate on how that will affect production at our plants.”

Last year, sales of compact SUVs surpassed sales of compact cars for the first time.

The trend of buying bigger led GM to cut costs by reducing a fourth of the Lordstown workforce. By Jan. 23, the third shift at Lordstown will indefinitely end. More than 1,200 will be affected — mostly hourly, but some salary workers. Hourly union workers will be laid off by seniority.

“It’s a concern when you lose a shift,” said Robert Morales, president of UAW Local 1714 representing 1,400 fabrication plant workers. “When you see people exit these buildings, as leadership, we take it to heart. That’s why we are so dedicated.”

CLOSING CONCERNS

Valley residents know there always has been talk of the end of GM Lordstown, a plant that has produced more than 16 million vehicles since it opened in April 1966.

The fear is fueled by concern about the impact the closing would have on the community. For every one job there, eight jobs are attached to it, Johnson said.

So, job loss at GM Lords-

town “is a huge economic blow to an already fragile community,” Johnson said.

The fear nearly became a reality in 2000.

Herman Maass, plant manager in 1996, received a phone call that the plant wouldn’t produce vehicles after 2000. Maass immediately called in the late Al Alli, longtime Local 1112 shop chairman, to his office.

Together, the two worked to come up with a plan to cut costs and save the plant. They did, and Lordstown got another car to build — the Cobalt.

And that led to the Cruze.

GM plants follow Global Manufacturing System principles, which include the “built-in-quality.”

“It just means running more efficiently,” Morales said.

Built-in-quality has four levels with four being the highest level. Lordstown is at built-in-quality level three.

Only two GM plants in North America are at built-in-quality level four: Canadian Automotive Manufacturing Inc. and the Ramos Arizpe, Mexico, plant. This year Morales and Johnson went to both plants to learn from each.

“This is a GM corporate challenge,” Johnson said.

Union leaders say they are making progress to reach level four when the plant is evaluated next year.

“We can’t get relaxed,” Morales said. “This is important.”

IMPACT OF TRUMP

Before President-elect Donald J. Trump received the Republican Party nomination, GM decided it needed Mexico-built next-generation Cruzes to supplement the U.S. market since production was still ramping up at the Lordstown complex.

The supplement started in September but will end come January when the third shift at Lordstown ends.

The Ramos Arizpe plant will continue to produce the Cruze for Mexico, Canada and Central America. It is also the sole producer of the Cruze Hatchback.

During his run for president, Trump discussed trade proposals that could impact the auto industry. He made clear he opposes Mexico-made products being sold in the U.S.

He has said he would like to impose a 35-percent tariff on Mexican-made vehicles.

Mousa Kassis, international trade adviser in the Ohio Small Business Development Center Export Assistance Network at Youngstown State University, said such a high tariff would be unimaginable.

“If we take the route of extreme protectionism, it will hurt our economy and relationship with global partners,” Kassis said.

Trump singled out Ford Motor Co. for its plans to move all small car production to Mexico by 2018 to save on wage costs.

Ford Chief Executive Officer Mark Fields fired back at Trump saying a tariff of 35 percent would have a huge impact on the U.S. economy.

The company also made it clear that the Wayne, Mich.,

factory that lost the production of the Ford Focus will not close. Instead, the plant will produce a Ranger pickup and Bronco SUV.

Analysts are waiting to see if Trump’s talk on tariffs becomes reality and to see what he does with the North American Free Trade Agreement, which eliminated most tariffs on trade between Mexico, Canada and the U.S.

As president, he can withdraw from NAFTA without input from Congress.

Politics would make it hard for Trump to impose a tariff.

“It will be difficult because you have a Republican Congress, and they will pick a fight,” said Simon Lester, a trade policy analyst with Cato Institute’s Herbert A. Stiefel Center for Trade Policy Studies. “What I hear from Trump is [he wants] to work with Republicans. I feel like they will push that off for a little bit.”

Kassis hopes to see Trump take a “wise approach” on global trade and consider the impact of placing extreme measures on goods and services, such as tariffs of high rates and trade regulations.

“It’s easy to declare war on trade,” Kassis said. “What’s not easy is to make the U.S. competitive. We definitely need better infrastructure, [more] skilled labor training and retraining. We need a program for human capital. That’s what’s going to make the U.S. competitive.”

Johnson and Morales want to see fair trade and not free trade, which they believe has hurt U.S. manufacturers.

“The Republican platform hasn’t been that in the past,” Johnson said. “I would be in [Trump’s] corner to revisit any trade deals that benefit American workers.”

U.S. Sen. Sherrod Brown, a Democrat, who led a charge against NAFTA, wants to see more trade but under different rules.

“[Trump] needs to make good on his commitment to withdraw from [the Trans-Pacific Partnership] and renegotiate NAFTA,” Brown said during a conference call last week. “I don’t believe you trade unilaterally. I think a unilateral tariff could cost jobs in Ohio. I don’t want the loss of jobs.”

GM says it looks forward to working with Trump and Congress “on policies that support a strong and competitive US manufacturing base.”

THE FUTURE

While other automakers are relocating small-car production, GM says it will continue to build compacts in the U.S.

“The Cruze is built at Lordstown, and the Chevrolet Sonic and new Chevrolet Bolt EV (electric vehicle) are made at the Orion Township plant in Michigan,” Wickham said. “We also build larger cars at plants in Detroit and Kansas City, Kan. As for future plans, we don’t speculate on product allocations.”

Analysts say GM Lords-

town has to stay competitive with efficiency and quality.

“They want to make sure they are competitive to get whatever product GM might want to move there,” said Michelle Krebs, senior analyst for AutoTrader.com. “The best plants will win the most secure products.”

Patrick Min, senior analyst at TrueCar, doesn’t think there should be too much concern about the future of Lordstown.

“It’s just GM’s continued commitment to sustainable profitability and business practices,” Min said of the workforce cut. “It’s supporting the health of the factory for a long time to come.

“It’s going to be really important for the factory and the workers to show commitment to quality,” he added.