Will GM Plan Be Short-Term Pain and Long-Term Gain?

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Parker says Fort Wayne's GM plant is positioned well because of its product mix. Parker says Fort Wayne's GM plant is positioned well because of its product mix.
INDIANAPOLIS -

While a massive reorganization announced last week by General Motors Co. (NYSE: GM) will mean pain in the form of five plant closures and the elimination of 14,000 jobs, an Indiana University Kelley School of Business professor says it was long overdue and should pay dividends for the automaker.  The GM plan, which includes the elimination of six passenger car models, is in response to a massive consumer move away from cars to trucks, SUVs and crossovers.  “I think for a long time they have been using incentives to push their money-losing vehicles and now finally they have bitten the bullet and I think it’s past time,” said Rodney Parker, associate professor of operations at the Kelley School.

In an interview for this weekend’s edition of Inside INdiana Business with Gerry Dick, Parker said Fort Wayne’s GM Truck Plant should be positioned well because of its product mix.

Parker notes that the six models GM is eliminating sold a combined 200,000 units through the first nine months of 2018.  By comparison, the Chevrolet Silverado alone sold about 424,000 units during that same period.  The Silverado is produced in Fort Wayne.

The migration of consumers from cars to trucks, SUVs and crossovers has been gaining momentum for the past decade. In 2008, the market was approximately 50 percent cars and 50 percent trucks, SUVs and crossovers.  Today, the larger vehicles command about 65 percent of the market and growing.  “Consumers have spoken with their feet and GM has been losing money on passenger cars for a long time,” said Parker.

Parker also noted that non-GM assembly plants in Indiana---Subaru of Indiana Automotive in Lafayette, Toyota Motor Manufacturing Indiana in Princeton and Honda Manufacturing of Indiana Inc. in Greensburg---all have product mixes in line with consumer demand.

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