The venerable Chevrolet Impala debuted 60 years ago and has been one of the best-selling vehicles ever. Just days before it was to hit the chopping block on March 1, 2019, the Impala received a stay of execution – for now – as GM decided to continue building it through January 2020.
But still, there’s no denying that sedans like the Impala have been falling out of favor as a new mobility movement gains momentum.
Last November, GM announced a restructuring in hopes of saving $6 billion by 2020. Once details are worked out, the company wants to close five North American facilities, cut six model offerings, and lay off thousands of employees. One of the six models is the Impala, which at one time had achieved almost cult-like status.
“I’m 52 so I remember those days,” says Dave Ketchen, Harbert Eminent Scholar and professor of management at Auburn University and an auto industry observer. “But let’s be candid, the current Impala is a soulless car. In 2018 no little kids are begging their parents ‘please buy an Impala.’
Consumers have made it obvious that they are not interested in boring sedans. Dealers will probably be happy as long as plenty of Corvettes, Camaros, pick-up trucks, and SUVs arrive on their lots. That’s where the demand is.”
The plants GM has been talking of shutting down in the United States and Canada currently produce cars that include the Chevrolet Cruze and the Chevrolet Volt plug-in hybrid. The company says its future production plans will focus on building more SUVs and trucks while also prioritizing battery-electric vehicles.
The GM plants which were slated to impacted are in Lordstown, Ohio, where GM builds the Chevrolet Cruze compact car, and in Detroit-Hamtramck, where it builds the Chevrolet Volt and Impala, the Cadillac CT6 and the Buick LaCrosse sedans. As of the last week in February, GM plans to keep both the CT6 and Impala in the lineup.
GM’s factory in Oshawa, Ontario, and two transmission facilities will lose product allocation beyond next year. In total, hundreds of factory jobs remain in jeopardy.
GM says these production shifts will help the company increase cash flow by the end of 2020.
But, reports Automotive News, “outside pressure is mounting, and the groups applying it sound convinced that they can force the company to re-examine its decision and save at least one of the plants during the 2019 contract negotiations with the UAW.” February 25, Fox News reported that the U.S. factories are now in “unallocated” status while GM negotiates with the UAW.
According to Automotive News, “On paper, the Detroit-Hamtramck plant in Michigan appears to have the best survival chances. It’s newer, has received substantial investments in recent years and is closer to other facilities – including GM’s battery plant and R&D operations – that are key to the automaker’s next generation of vehicles.” The Detroit-Hamtramck plant is expected for now to remain open through January 2020.
“We recognize the need to stay in front of changing market conditions and customer preferences to position our company for long-term success,” CEO Mary Barra said in a statement late last year.
Like other auto manufacturers, GM is investing heavily in the mobility movement: state-of-the-art electrification, autonomous vehicles and ride-sharing technologies.
Ford, which already was moving toward more mobility, announced in December it is making even more production changes and job cuts that will affect workers in two metro Detroit plants.
Ford said it will add 500 jobs at the Livonia plant, moving 650 employees from Flat Rock, Michigan.
The Van Dyke Transmission plant in Sterling Heights, Michigan, will cut 230 full time hourly jobs and the Dearborn Diversified Manufacturing plant is cutting 25 temporary part time jobs. Those workers in Dearborn have already been offered new jobs within Ford. The same will happen in Sterling Heights.
“As we continue to rebalance our production to match capacity with customer demand, we are planning a reduction of approximately 230 jobs at Van Dyke Transmission Plant in the first quarter of 2019. All full-time hourly employees affected will be offered jobs at another Ford plant,” a Ford statement says.
President Donald Trump says he disapproves of GM’s plant closing and layoffs and tweeted that his administration is looking at cutting all GM subsidies, including those for electric cars.
That could be a problem for GM, whose restructuring plan is largely intended to help it clear the way for an electric-centric, autonomous-vehicle future.
But the plants GM slated for closure are in the upper Mid-West and Canada. Are auto manufacturers in the South pondering similar moves?
“Baseball legend Yogi Berra wryly noted that predictions are hard to make, especially about the future,” says Ketchen.“But barring a recession, I’d be surprised if we see any retrenchment involving southern auto plants, at least in the short term. Most of the relevant brands – Mercedes-Benz, BMW, Kia, and Hyundai, for example – are performing well in the marketplace.
New products such as BMW’s large SUV, the X7, are being introduced regularly. The foreign brands that operate in the South have good labor relations and do not need to rattle their sabers to get concessions from unions. Tariffs are troublesome but we are halfway through the president’s term. Looking down the road, if Trump is re-elected in 2020 and his administration emphasizes tariffs in his second term, we might see some pullbacks. But I think the attitude for now will be ‘wait and see.’”
Ketchen says the South’s relatively more recent entry into auto manufacturing – compared, for instance with Detroit or Ohio — means that by and large, southern plants are newer than their northern counterparts.
“They have more flexible layouts and a greater capability to accommodate automation. The Kia plant in West Point, Georgia, began production in 2009 and the facility was expanded and upgraded in 2012. Having toured the plant, the level of technical sophistication is mind-blowing,” Ketchen says. “This plant and others in the South are moving targets and older plants in the North will have a hard time keeping up. GM’s Detroit-Hamtramck plant – one of the ones slated for closing – was opened in 1985.
“Family homes offer a good analogy – a house built in 2012 is going to be much easier to adapt to newer technologies such as tankless water heaters, than a house built in 1985. We can also imagine a drag race between Corvettes made in 2012 and 1985 – no contest.”
Ketchen says GM could help its dealers by putting a high performance engine in an SUV or a pick-up.
“Vehicles such as the Ford Raptor, the Jeep Trackhawk, the BMW X5M, and the Mercedes-Benz AMG GLE63 build brand prestige within key market segments and these vehicles typically enjoy high margins,” Ketchen says. “Now Jaguar is joining the race by putting a supercharged V-8 engine in the F-Pace. Imagine a Buick or Cadillac SUV with a Corvette or Camaro engine. I think dealers would be selling those at sticker price and they might even have waiting lists.”
According to the Detroit News, GM’s electrification efforts are expanding in the U.S. and abroad as the Detroit automaker moves toward its goal of introducing 20 electric vehicles by 2023.
With gas and diesel costs bouncing around and a growing concern for tackling ever increasing pollution, electrification is a highly viable option.
According to a McKinsey report, by 2030, the share of electrified vehicles (hybrid, plug-in, battery electric, and fuel cell) could range from 10 percent to 50 percent of new-vehicle sales.
That said, Ketchen notes that “South Korean battery maker SK Innovation just announced a plan to build a billion-dollar plant in Georgia that will break ground in 2019 and begin production in 2022. Certainly that level of investment signals that SK is quite optimistic about future production in the southern U.S.”
The investment is estimated at $1.67 billion and, according to SK Innovation, it will create more than 2,000 jobs. The first phase ($1 billion and more than 1,000 jobs) will begin in early 2019.
SK Innovation says that it’s new factory will be “the largest scale electric vehicle battery plant in the United States.”
Two automotive groups, Mercedes-Benz and Hyundai-Kia Motors, were mentioned among SK Innovation’s customers.
It is also worth noting that new language for the AV Start Act, a bill that has lingered in congressional limbo for almost a year, is beginning to circulate through the U.S. Senate. The bill, the “American Vision for Safer Transportation through Advancement of Revolutionary Technologies Act,” would create a loose framework for the testing and deployment of automated vehicles.
Meanwhile, Ketchen will continue cruising to his job at Auburn in his 6-cylinder supercharged 2017 Jaguar F-Pace, saving his 2008 BMW M3 and his 1967 Austin-Healey 3000 for weekends.
Update: this story was updated February 25 to reflect changing developments relating to GM plant closures.