Commentary: The Game of Unallocation

"Unallocated?" – Photo by Randy Stern

It was not the news that got our attention. It was the speculation based on the news.

I already talked about this before. The way we cover news has been a mixed bag of sticking to honest and professional tenets to spinning towards the intended audience you want to rile up.

Somewhere in the middle was the coverage of a press release that General Motors released regarding their “transformation." In all, it was an announcement of the reduction of facilities, labor, and overall corporate efficiencies.

One set of facts that stand out in the press release. GM will not allocate production to five facilities in North America. These facilities include the ones in Oshawa, Ontario, Hamtramck near Detroit, Lordstown in Warren, Ohio, the transmission plant in Warren, Michigan, and the facility in White Marsh, Maryland near Baltimore.

According to an attachment that went with the press release, GM did announce the vehicle affected by these unallocated plants. They just happen to be sedans and hatchbacks – including the Chevrolet Cruze, Impala, Volt, Cadillac CT6, XTS, and Buick LaCrosse.

The other fact is what GM calls “staffing transformation.” A few months ago, GM reached out to 15 percent of its salaried and salaried-contract staff to either be bought out of their careers or face a layoff. These include 25 percent of executive level positions. The number of employees affected by the unallocated plants number somewhere around 12,000-15,000.

These actions should highlight the company’s fiscal path in 2019. The cause of these actions appears only to be seen as changes in consumer’s tastes in relation to their product portfolio. Translation: nobody is buying GM’s sedans, hatchbacks, and coupes. In particular, no one is buying Impalas, Volts, Cruzes, LaCrosses, and big Cadillac sedans.

This is where one has to be careful when discussing this. Noone at GM has officially stated other facts to as to why GM is taking the steps to remain in business and within profit targets. They did send a subsequent press release stating that they are still committed to production activities in the USA and Canada.

This is not the news any employee wants to hear when they come back from Thanksgiving. Nor is this the kind of news you want to spark debates on corporate governance, the government – in this case, the American and Canadian governments – and stir up emotions beyond those affected by this announcement.

That was exactly what transpired. We all got whipped up inthe frenzy of blame games, grandstanding, and speculation. So did the President of the United States, the Canadian Prime Minister, the heads of both autoworker’s unions…and you on social media. These were followed up by meetings between Barra and delegations from officials from these unallocated plants. Oneside saying they were "constructive," the other…not so much.

Cooler heads will prevail. I am trying to be one of those cooler heads.

I saw some flaws in this plan. Understanding that this appeared to be a pre-emptive move to save money to weather a potential economic downturn, it would not have been the right move to make at Renaissance Center. One look at how Ford eliminated their car models would be one way forward. Instead of closing plants, Ford had planned on replacing lost capacity with products that will sell across North America. For example, the Michigan Assembly Plant that used to build the Ford Focus has been switched to producing the Ranger pickup and, soon, the Bronco SUV.

One could see solutions just float around to resolve the unallocation crisis. Could GM feasibly build the Chinese-made Buick Envision SUV at Lordstown to avoid tariffs imposed by the USA government? If you are adding more Cadillac SUVs why not make them at Oshawa or Hamtramck?

It brings up another can of worms – product development. One report had GM saving the extended range EV VOLTEC driveline. For which vehicle? If the SUV market is supposedly growing, then a VOLTEC driveline would work ina Chevrolet Equinox or GMC Terrain. Just a thought, GM…

Another series of reports I keep reading is how GM is slipping back into fiscal instability. Before we evoke Chicken Little, let’s take a step back. The price of materials to make these vehicles have not only increased over years, there is an additional tariff on imported materials – Canadian steel and aluminum, for example – that are used to build many vehicles in this country.

Consider this in regards to the Oshawa plant: the Canadian government wants to help the furloughed workers after the lines are shut down. One fact that was brought up was the automotive industry represents one percent of Canada’s gross domestic product, while the energy industry is up to seven percent. In case you were wondering, fuel prices have dropped and are now stabilized. The drop in fuel prices created a crisis in Alberta’s energy industry. There are claims that the government has not acted to save the potential jobs lost in that industry – compared to the messages that have come from Ottawa and the Prime Minister’s office.

Then again, we are seeing GM pulling back from operations worldwide to save money. That move has come home to the doorstep of RenCen. Not sure how to continue calculating an end game for GM.

Yet, GM appears to want to stay true to its plan. They may stick to their guns and unallocated these plants to try to balance the company’s North American lineup and their bottom line. You can say whatever you want about GM’s motives or other related items affecting this move. The fact that GM– and the rest of us – are talking about it is putting light to a future that may not what we want from a company we trusted with our transportation needs for well over a century.

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