Janesville25.9°

Analysts: 2015 could be telling year for Janesville GM plant

Print Print
Jim Leute
June 30, 2013

— The U.S. auto industry's return to the fast lane has carmakers and parts suppliers planning to add employees, equipment and floor space.

But it appears the shuttered General Motors' assembly plant in Janesville will remain parked on the shoulder—at least until 2015 when GM and its union negotiate a new contract.

"I don't see a need for enough new production capacity to warrant re-opening Janesville in the near term, but at the same time, I also don't foresee a full closure—at least not before 2015," Kristin Dziczek, director of the Center for Automotive Research's labor and industry group, said in an email.

"In my opinion, the next few years the status of Janesville will remain unchanged."

The facility that stopped making full-size sport utility vehicles in December 2008 is officially a "standby" plant.

As part of its bankruptcy in 2009, GM closed several sites and placed them in a trust to administer their sale. The automaker kept three plants on standby status: Janesville; Orion, Mich., and Spring Hill, Tenn.

Orion subsequently won production of a small car, and Spring Hill eventually came back online as a flex plant for production of the Chevrolet Equinox and GMC Terrain.

That leaves Janesville as the only plant still on standby, theoretically next in line for production if and when GM needs it.

The 2015 contract between the United Auto Workers and the automakers will be critical for the Janesville plant, which can only be officially closed by agreement of both GM and the UAW.

The 2011 four-year pact between the UAW and GM kept Janesville on standby. If Janesville survives the 2015 negotiations on standby status, it would remain an option for future production. If it loses that status, it would move into the purview of the bankruptcy trust and likely be sold.

"As of today, we are a still a standby plant, and there is no discussion as to the future of the assembly plant in Janesville," said Tim Silha, president of UAW Local 95 in Janesville.

Industry analysts aren't sure GM will ever need more capacity or—if it does—whether the automaker would ever return to Janesville, which Dziczek said is "on the wrong side of Chicago" and GM's return to its core of manufacturing in Michigan, Indiana and Ohio.

High times

From coast to coast, the auto industry is in top gear. Factories are operating at about 95 percent of capacity, and many already are running three shifts. As a result, some auto and parts companies are doing something they've been reluctant to consider since the recession: add floor space and spend millions of dollars on new equipment.

The outlook is bright, as vehicle sales for 2013 could reach 15.5 million, the highest in six years. Most industry analysts predict sales will rise gradually during the next five years.

LMC Automotive, a Troy, Mich., forecasting firm, predicts that sales gradually will increase to 17 million in 2017. That level would be almost equal to the boom years of the late 1990s and early 2000s.

Dziczek's Michigan-based Center for Automotive Research won't go that far, instead predicting U.S. sales of about 16 million by 2017.

"I don't think we're headed to the glory days of 17 million primarily because of price," she said. "There's tremendous pressure to keep prices higher and margins higher because that's what's fueling the profits the industry is enjoying."

Automakers are reluctant to add new bricks and mortar and are instead pursuing different staffing and investment strategies that maximize productivity of existing resources, she said, noting that U.S. automotive productivity has never been higher.

GM is building a 500,000-square-foot addition to its plant in Wentzville, Mo., to handle expected sales of the next generation of midsize pickup trucks due out next year. But at Ford, executives want to keep costs down by squeezing as many cars and trucks as possible out of existing factory space, mostly by increasing line speeds and breaking up equipment bottlenecks.

From January through May, automakers and parts companies hired 8,000 workers, a relatively slow rate. But the pace is picking up, and the research center expects the industry to add 35,000 over the full year.

The industry would be adding even more workers if not for productivity gains made since the boom years, Dziczek said.

A future for Janesville?

"Clearly, the industry is progressing, and we're going to have another good month of numbers," said Jesse Toprak, senior analyst for the auto-pricing site TrueCar.com. "We're clearly going in the right direction, but it's tough to say whether there will be a need for Janesville.

"I don't think anybody knows. I don't think even GM knows."

Toprak said Janesville's future might hinge more on demand for new alternative products than the plant's geography. Janesville, he said, has a solid reputation for its workforce and quality production, even though that workforce has evaporated into retirement or jobs at other GM plants.

"It's not really that far from anything, and it worked well there for a very long time," he said.

Dziczek said her organization has closely analyzed GM's North American production capacity, and there is still room for full-frame production growth with the company's current roster of plants.

"It's unfortunate that it's wait and see for Janesville," she said. "If GM ever needs additional capacity and that were to include Janesville, it would be my guess that the plant would need a total rebuild.

"From a logistical standpoint, it doesn't help that Janesville is on the other side of Chicago. It's just not the easiest place to build vehicles."



Print Print