AUTO INDUSTRY REPORTER
General Motors Co. will invest nearly $100-million to increase production capacity at one of its Canadian assembly plants, a move that signals the auto maker's growing confidence in the auto recovery and robust consumer demand for the two vehicles made at the plant.
The upgrade to Cami Automotive Inc. will be announced this morning at the plant in Ingersoll, Ont., sources familiar with GM's plans said.
The investment is designed to increase output of the Chevrolet Equinox and GMC Terrain crossover utility vehicles, which have experienced hot consumer demand and helped GM produce its first monthly U.S. sales gain in 21 months in October.
The move, which comes about four months after GM emerged from Chapter 11 bankruptcy protection with the help of the U.S., Canadian and Ontario governments, reverses a recent trend of slashing capacity at its North American operations.
But although it is a sign that the financial health of the automotive industry and the company is improving, it does not likely herald a wider expansion on GM's part in the domestic auto sector - at least, not right now.
Cami now has the capacity to make about 250,000 vehicles a year.
GM will increase that by retooling one of two body shops in the joint venture plant and making other adjustments. Those include such efforts as utilizing space and equipment that has been sitting idle since the auto maker's partner, Suzuki Motor Co. Ltd., halted production of its XL7 crossover utility vehicle earlier this year.
The retooling, which is expected to cost about $90-million, will take place over the next seven months and lead to the recall of about 150 workers who are on layoff, sources said.
Another 350 workers were recalled last month when GM restored a third shift of production at the plant. When this project is completed, about 2,200 workers will be fully employed and none will be on layoff.
GM is striking now, while the Equinox and Terrain are popular, because vehicles are the most profitable when they are new or redesigned models and profit-sapping incentives are not needed to move them off dealers` lots.
The auto maker closed a full-sized pickup truck plant in Oshawa, Ont., in May and closed one of its car plants in that city earlier this decade. It also closed several U.S. plants as part of a restructuring that left the three governments as the company's largest owners, with 72 per cent of its shares. Ottawa and Ontario own about 12 per cent.
While GM was heading toward bankruptcy protection in May, Cami began cranking out a redesigned version of the Equinox and it is now GM's second highest-selling crossover utility vehicle, behind the larger Chevrolet Traverse.
Sales of Terrain soared 124 per cent last month from September levels and were 80 per cent higher than sales in October, 2008, of the vehicles it replaced, the Pontiac Torrent and GMC Envoy.
An increase in production from the 54,942 vehicles Cami has produced so far this year will also benefit parts makers, including Magna International Inc., which turns out about $1,800 (U.S.) worth of parts for each of those vehicles, including the seats.
The Canadian Auto Workers union, which represents workers at the plant, pressed GM to increase capacity at CAMI instead of assembling Equinox and Terrain at another plant, after signing a deal in September that cut benefits and froze wages and pensions. In return, GM agreed to make the replacement products for the two crossovers at Cami after 2014.
The plant, which started as a GM-Suzuki joint venture in 1989, has never reached full capacity, peaking at 196,598 in 2006.
A source at one supplier noted yesterday that it has been a "boom and bust" operation for 20 years.
"We don't have a whole lot of faith in their ability to sustain these high volumes past next August," the source said.