Did GM want the Cruze to fail?

The headline might come across as a last-ditch effort to denigrate General Motors as it winds down operations at its Lordstown assembly plant. Production of the once top-selling Chevrolet Cruze will end this week and the enormous facility will be idled.

But there’s a basis for questioning GM’s intentions, and it actually comes from a high-ranking company executive.

In the lawsuit filed by the United Auto Workers to block GM from idling the Lordstown plant, there’s a letter from Catherine L. Clegg, vice president North American Manufacturing and Labor Relations, to Cynthia Estrada, vice president and director, General Motors Department International Union, UAW.

The letter, dated Oct. 25, 2015, states:

“Subject: Plant Closing Moratorium

“As a result of your deep concern about job security in our negotiations and the many discussions which took place over it, this will confirm that during the term of the new Collective Bargaining Agreement, the Company will not close, idle, or partially or wholly sell, spin off, split off, consolidate or otherwise dispose of in any form, any plant, asset, or business unit of any type, beyond those which have already been identified, constituting a bargaining unit under the Agreement.

“In making this commitment, it is understood that conditions may arise that are beyond the control of the Company, (i.e. market related volume decline, act of God), and could make compliance with this commitment impossible. Should such conditions occur, the Company will review both the conditions and their impact on a particular location with the Union.

“Should it be necessary to close or idle a plant constituting a bargaining unit consistent with our past practice, the Company will attempt to redeploy employees to other locations and, if necessary, utilize Attachment A of Appendix K of the GM-UAW National Agreement or other incentivized attrition programs as agreed to by the National Parties.”

In responding to the UAW lawsuit, filed in federal court in Cleveland, the company will undoubtedly contend the Lordstown plant is being idled because of a market related volume decline in the sales of the Chevy Cruze.

When it does, it will open the door to the UAW exploring the sales history of one of the best-selling, top-quality, competitively priced compact cars in the nation.

The Cruze was launched at the Lordstown plant in 2010 – it replaced the very popular Chevrolet Cobalt – and a second generation came off the assembly line in 2016.

The company contends that its decision to discontinue the Cruze was prompted by a change in consumer tastes. Buyers have been flocking to trucks, SUVs and crossovers because of the relatively low gas prices and improvements in fuel efficiency, GM says.

But the question the UAW should pursue through its legal action is this: Was the decision to shelve the Cruze based on the fact that the profit margin on each unit is low compared with the huge profits GM is making from sales of its trucks, SUVs and crossovers?

According to Reuters news service, GM makes $17,000 in pre-tax profit on average for every full-size pickup sold. The 2019 Silverado and 2019 Sierra should help that figure climb.

By contrast, the profit on a compact car like the Cruze is miniscule.

The argument can be made the company’s decision to end car production was driven by profit margins rather than consumer demand.

Indeed, the UAW could show that the company sought to undermine sales of the Cruze by cutting back on national advertising for the compact car while making a making major push for trucks, SUVs and crossovers.

In May 2017, then Vindicator Business Writer Kalea Hall wrote a story about a group of 17 car dealers in the Mahoning and Shenango valleys called The Chevy All Stars launching a TV commercial campaign to highlight the award-winning the Cruze.

Tom Brittain of Brittain Motors in East Palestine and vice president of the All Stars, offered a glowing review of the Cruze, Consumer Reports “Top Pick” for a compact car. It had been a decade since a domestic car had won such acclaim.

“That car is a great car,” Brittain said. “It has always been a good seller. Ever since it came out. The workers at the plant and the engineers have all developed a car that is very economical and very well priced and very dependable with a great resale value. We want all our local people to realize that.”

That comment from an individual on the front lines of GM’s auto-sales strategy stands in stark contrast the company’s contention that the Chevy Cruze is not worth producing.

The UAW in defending its lawsuit to stop GM from idling the Lordstown plant should also enter as evidence a story by Hall dated Feb. 2, 2017. The story is headlined “Cruze sales up while production is cut back.”

Here’s what Hall, who is no longer with The Vindicator, wrote, in part:

“Chevrolet Cruze sales started off the year with an increase, but the production of the compact car has been cut back.

“On the same day General Motors announced a 38.9 percent year-over-year increase in Chevrolet Cruze January sales, the automaker also announced there will be several weeks when production is down at the Lordstown plant where the Cruze is made.”

Last November, CEO Mary Barra announced that production of the Cruze will end March 8 and no other product will replace it.

In light of GM’s obvious push for high-profit vehicles, the question posed by the headline – “Did GM want the Cruze to fail?”– has only one plausible answer: It certainly appears so.

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