GM to Eliminate Shift at Tennessee SUV Plant, Lay Off Hundreds -- Update

By Mike Colias 

General Motors Co. will lay of several hundred workers at a sport-utility plant in Tennessee, a sign that the slowdown in the broader car market is spreading to once-hot SUVs.

GM notified employees at its Spring Hill, Tenn., assembly plant Friday that the company will lay off the overnight shift because of "moderating" sales of the two crossover SUV models built there. About 1,000 people work on that shift, though some might be able to transfer to other parts of the operation, which also makes engines and other components, a GM spokesman said.

"Although crossovers now make up a larger share of the automotive industry, overall volumes are moderating," GM said in its notice. "We believe the best way to react...is to reduce output."

The factory makes the GMC Acadia and Cadillac XT5 crossover SUVs. Both vehicles are part of a slew of new or overhauled SUVs that GM is counting on to drive U.S. sales and profit growth as demand for passenger cars continues to wane.

U.S. vehicle sales have cooled this year after a seven-year growth spurt and two straight years of record volumes. Healthy pickup-truck and SUV demand has helped offset a sharp decline in sales of passenger cars, though signs of a slowdown in those more-profitable segments have surfaced in recent months.

GM has been particularly aggressive among auto makers in responding to cooling demand. The nation's largest auto maker has laid off roughly 5,000 factory workers across a half-dozen plants since late 2016. The vast majority of those let go worked at factories that build passenger cars.

Consumers in recent years have been trading in their sedans and coupes for crossover SUVs and pickup trucks amid a protracted period of low gasoline prices. Analysts say more buyers are choosing crossover SUVs for their functionality and improved handling in bad weather. Because they ride on car underpinnings, many also offer better fuel economy than SUVs of years past.

But auto makers in recent months have been forced to offer heftier discounts on SUVs to keep buyers interested, and a backlog has begun crowding dealer lots. Yet more SUV models are expected to hit showrooms over the next few years at car companies seek to offset weakening car sales.

The industry is "wildly overweight on crossovers," John Murphy, auto analyst for Bank of America Merrill Lynch, said in a recent presentation.

GM also disclosed Friday that it plans to spend nearly $300 million to retool the Spring Hill plant in preparation for a new Cadillac crossover model. That entry could spur hiring at the plant but it isn't expected to go into production until 2019 or later.

GM executives have said they believe the company's spate of new or revamped crossover SUVs will help it offset softer pricing in other market segments.

"We see our crossover launches driving favorable price performance throughout the balance of the year," GM finance chief Chuck Stevens told analysts in April.

Write to Mike Colias at [e-mail]

(END) Dow Jones Newswires

September 22, 2017 19:47 ET (23:47 GMT)

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