GM to Close 11 Midwest Plants, Cut 29,000 Jobs

DETROIT —  General Motors Corp., in the largest wave of permanent plant closings it has ever announced, said Thursday that it will shut down 11 assembly and component facilities between 1987 and 1989, eliminating 29,000 jobs throughout the Midwest.

GM confirmed, however, that its big Van Nuys assembly plant, which has been threatened with closure for several years, will remain open.

Sagging Profit Margins

The closings--affecting seven plants in Michigan, two in Ohio and one each in Missouri and Illinois--are part of GM’s corporate-wide drive to drastically reduce costs and boost sagging profit margins in the face of sluggish sales and increasing foreign competition. GM has reported a $338.5-million operating loss for the third quarter--its largest deficit since the last recession.

As a result, the world’s largest industrial company has come under heavy fire from industry observers who say it has allowed its manufacturing costs to run wild. But GM Chairman Roger B. Smith stressed Thursday that the closings will reduce the auto maker’s fixed costs by $500 million a year, and he added that GM is planning to reduce its salaried work force by 25% by 1990.

The decision to close so many plants reflects GM’s desire to rid its manufacturing network of its oldest operations in order to consolidate car and truck making at newer facilities employing fewer workers.

The long-awaited announcement, made by Smith and GM President F. James McDonald at a news conference here, ended weeks of speculation concerning the fates of dozens of GM plants around the country, including the Van Nuys assembly plant.

Smith and McDonald confirmed that the Van Nuys facility will not be affected by this round of shutdowns and said that it will continue to produce Chevrolet Camaro and Pontiac Firebird models for at least the next several years.

4,000 Ohio Jobs Lost

Instead, GM said it will close by mid-1988 a sister plant in Norwood, Ohio, which also builds Camaro-Firebird models, eliminating 4,000 jobs in the Cincinnati area.

GM will then consolidate production of the sports cars in Van Nuys, which may result in the resumption of a second shift at the Van Nuys plant, GM spokesmen said. Its second shift was eliminated in July because of poor sales of Camaros and Firebirds, and Van Nuys has been operating on one shift with about 2,500 workers.

Many of the assembly plants to be closed are old facilities that produce models that are slowly being phased out of GM’s lineup; most of the parts plants to be closed supply components to the targeted assembly operations.

Plants Had Been Reprieved

A number of the plants, which build large, rear-wheel-drive cars, had initially been scheduled for closing several years ago, and replacement plants have already been built. But the old operations had been spared because the decline in oil prices boosted demand for rear-wheel-drive cars. Now, however, the recent erosion in its market share has made it more difficult for GM to justify retaining so much excess production capacity.

“This takes us out of old, six-story-high plants and into brand new plants, where we can consolidate production and add capacity in those plants,” Smith said. “But, over the longer term, the closings will lower our capacity overall, there’s no question about it,” he added.

The bulk of the closings will occur in GM’s enormous manufacturing network in Michigan, hitting the auto-dependent state with a severe body blow just as it has been slowly recovering from the last recession.

“I am deeply concerned about the impact on the workers, and their families,” said Michigan Gov. James J. Blanchard, who was elected to a second term this week after campaigning on his ability to create jobs.

Closings in Detroit

The company said it will shutter its Cadillac-Clark Street assembly plant in Detroit, its companion Fleetwood-Detroit body assembly plant and the related Conner Avenue stamping plant. Combined, the closings will eliminate 7,300 jobs in the already depressed city of Detroit.

The Clark Street assembly and Fleetwood body plants, which make up GM’s oldest assembly complex, will be closed in December, 1987, and production of the large rear-wheel-drive cars built there--the Cadillac Fleetwood Brougham, Chevrolet Caprice and Oldsmobile Custom Cruiser wagon, will be moved to GM’s Arlington, Tex., assembly plant. The Conner Avenue operation will be gradually phased out between 1987 and 1989.

The headquarters staff of GM’s Cadillac Division, which is housed in the Clark Street facility, will also move out but will probably remain in Detroit, said William Hoglund, group executive of GM’s Buick-Oldsmobile-Cadillac car group.

Workers Depressed

Workers at the Detroit Fleetwood plant were depressed and bitter Thursday after hearing the news. “I’m getting married next week, and this is going to hurt bad,” said Greg Ronewicz, a production worker at Fleetwood. “I don’t think Wendy’s pays $14 an hour, so I think a lot of us are going to have to move out of state.”

Fleetwood worker Orlando Green added: “We’re going to go back to the way things were in 1979. It’s going to be madness around Detroit.”

GM said also that it will close an assembly plant in Pontiac, Mich., that produces rear-drive Buick, Oldsmobile and Chevrolet models, along with a related body assembly plant in Flint, Mich., by the end of 1987, eliminating 4,500 jobs. Both facilities have been living on borrowed time in recent years. The Pontiac plant was closed briefly in 1982, and GM later announced that it would close the Flint facility, only to keep it open when fuel prices declined.

Site of Famed Sit-in

The closing of the Flint body plant marks a special passing in the history of the auto industry--the plant was the site of the United Auto Workers’ celebrated sit-down strike of the winter of 1936, which sparked the union organizing drive at GM and helped create the modern industrial labor movement.

Meanwhile, GM’s heavy duty truck and bus plant in Pontiac also will be closed, eliminating 2,200 jobs. In August, GM agreed to form a joint venture in the heavy truck field with Volvo, allowing the auto maker to reduce its exposure to that troubled market.

The company said in June that it was putting its transit bus business up for sale. The truck assembly line will be shut down in August, 1988, and the bus operation will end next spring.

Truck Plant Closing

An additional 3,450 workers in Flint will lose their jobs by next August when GM eliminates full-size pickup truck production at a plant there. The Flint facility will continue to produce utility vehicles, however.

Elsewhere, GM plans to gradually phase out a stamping plant in Willow Springs, Ill., that produces body panels for large cars, slashing 2,900 more jobs, and a stamping plant in Hamilton, Ohio, that employs 2,500 workers. Both facilities will be closed by 1989 or 1990. Finally, a light truck assembly plant in St. Louis that employs 2,200 workers will be shut down in mid-1987, with its truck production moved to several newer facilities.

Both Smith and McDonald tried to put the closings in the best possible light, noting that GM has already built six new assembly plants and refurbished 12 other facilities in recent years to replace the operations being shut down.

More Shutdowns Possible

But the two GM executives hinted that more plant closings may be announced over the next year or two. “I wouldn’t say this is the end of plant closings,” McDonald said. “You are always reviewing that.”

They insisted that the closings should not have a serious impact on GM’s relations with its workers, because union leaders and hourly workers have known for several years that the targeted facilities were not likely to remain open for long.

Smith noted also that many of the workers will be eligible to transfer to other plants or to receive substantial layoff benefits under a variety of new programs provided under the auto maker’s labor agreement with the UAW.

But Donald Ephlin, director of the UAW’s GM department, said in a statement that “we naturally regret this decision,” adding that the closings “reflect the perilous state of America’s most important manufacturing industry because of the inaction of our government in the whole area of trade and industrial policy.” Ephlin added that he is forming a union task force to work with laid-off employees to ensure that they obtain the proper benefits under the UAW’s contract.

Workers are pleased that GM is keeping the Van Nuys plant open. Story in Business.