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Auto recovery would bode well for Janesville GM facility

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JAMES P. LEUTE
September 22, 2011
— The fact that an assembly plant Spring Hill, Tenn., did so well in the recent General Motors-United Auto Workers contract negotiations could bode well for the automaker’s idled plant in Janesville, an industry consultant said Wednesday.

GM and UAW negotiators reached a tentative agreement late last week on the four-year contract.


Most noteworthy in these parts is a product commitment of two mid-size vehicles to the Spring Hill assembly plant, which GM closed in 2009 but retained along with the Janesville plant in its reorganization.


GM designated Spring Hill and Janesville as “standby” plants, meaning that although they were idled, they could be put back into service if the automaker needed more production capacity.


The contract, which UAW locals around the country will soon vote upon, makes the $419 million commitment to Spring Hill for two programs that will result in more than 1,700 new jobs.


About 600 new jobs are expected at Spring Hill next year, with 1,100 more to follow in 2013.


Industry speculators predict Spring Hill workers will build the Chevrolet Equinox and GMC Terrain midsize crossover utility vehicles, now being assembled at a Canadian plant that hasn’t been able to keep up with orders.


The contract also says that the Janesville plant will remain on “standby” status.


David Cole, chairman of the Michigan-based Center for Automotive Research, has long maintained that both plants could come back online.


His oft-made prediction that Spring Hill would precede Janesville appears correct.


Cole said Wednesday that he was not at all surprised by the extent of work committed to the Spring Hill plant, work that the UAW has said originally was slated for Mexico.


The automaker, he said, is stretching its capacity and adding shifts at its 11 operating U.S. plants.


“You can put Spring Hill on the table as a victory for the UAW, but I think GM is getting to the point that it really will need the capacity,” Cole said. “And, of course, after Spring Hill, Janesville is next in line.”


Cole said GM is making that commitment to Spring Hill now, even though projections call for the U.S. auto market to sell 11.5 million to 12 million vehicles this year.


That’s well below what many consider a recessionary level of 14 million vehicles per year.


U.S. light-vehicle sales hit 11.6 million in 2010, up from the previous year’s 10.4 million—the lowest total since 1982, according to industry researcher Autodata Corp.


Sales averaged 16.8 million annually from 2000 to 2007.


“Right now, there’s uncertainty with the overall economy,” Cole said. “People are just sitting on their wallets.


“If the market rebounds, and I think it will, GM will need more capacity if it can maintain its 20 percent share of a market at 15 or 16 million vehicles.


“That’s when I think GM will consider reopening Janesville. They’ve always liked the workforce there.”


Of course, the vast majority of that workforce is gone, either transferred to other GM operations, retired or in some other way no longer associated with the automaker.


Still, Cole said, the potential is there for a similar type of workforce.


In addition, a UAW summary of the contract indicates that GM will invest $150 million and create or retain more than 500 jobs through the assembly of a new compact vehicle at a plant yet to be determined.


UAW Local 95 President Mike Marcks was in Detroit on Tuesday to get contract details.


Throughout the year, he and other union leaders have pressed UAW leaders to keep Janesville in mind as they negotiated the contract. The goal, he said, was that if a product couldn’t be assigned to Janesville, at the minimum the plant would not be moved to “closed” status.


As of Wednesday, it was uncertain how many local UAW members would be eligible to vote in Janesville on the contract.


It also was uncertain when that vote would occur.


Cole said the recent contract is a signal that the UAW and GM have reached a level of labor-management harmony not seen in some time.


The contract includes a new profit-sharing formula that is based on the company’s North American profits. If GM earns less than $1.25 billion, workers won’t get any payment. In 2010, GM earned just under $5.7 billion in North America, which would mean a $5,500 profit-sharing check under the new formula. Under the old formula, workers got $4,300.


“Now, everything’s based on the performance of the company,” he said. “GM’s moving into levels of really significant profitability, and the union’s seeing that if it can make money at 11.5 million or 12 million vehicles a year, it could really do well at 15 million or 16 million.”



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