The artisanal movement is predicated on small scale. For beer aficionados, there is a big difference between a few barrels and an ocean of Bud.
Consumers are willing to pay a premium for an artisanal product because it is perceived to be special. But big companies don’t do artisanal. Instead, the auto industry is all about scale.
Scale means that engineering costs can be spread across a number of products or, especially, a vast number of units. It means buying steel or seatbelts or sensors at volume. Think of it as a trip to Costco.
But scale also means automakers tend to build more product than they need, producing to a plan rather than to actual orders. And even if a given vehicle is a success for a time, that period will pass.
And that brings us to where the industry is today. By and large, automakers have too much capacity for vehicles that people are losing interest in. It isn’t that no one’s buying Cadillac CT6s or Chevy Cruzes — the
Cruze is actually GM’s fourth-best-selling vehicle. But its sales are down 26 percent so far this year over the same period last year, and are less than half of what they were just four years ago. Meaning that people aren’t buying them at a rate that comes anywhere close to justifying the production capacity.
And so Mary Barra, GM chairman and CEO, announced on Monday that, “The actions we are taking today continue our transformation to be highly agile, resilient and profitable, while giving us the flexibility to invest in the future.”
Those actions: Three assembly plants — Oshawa, Ontario; Detroit-Hamtramck; and Lordstown, Ohio — and two propulsion plants — Baltimore and Warren Transmission —
“will be unallocated in 2019.”
Which presumably means they’re not going to be building products much longer.
Some 14,000 jobs are at risk, including the reduction of “salaried and salaried contract staff by 15 percent.” GM, perhaps as some sort of perverse sweetener, threw in that this “includes 25 fewer executives.”
Barra: “These actions will increase the long-term profit and cash generation potential of the company and improve resilience through the cycle.”
Fewer factories, thousands of employees who won’t be getting paychecks — yes, that will certainly reduce the outflow from GM’s coffers, giving it more money to invest in automation and electrification (the next stage of it, as the Chevy Volt, at one time
GM’s moonshot car, is one of the
six models being discontinued). Though in spite of those cuts, which have
raised so much furor, GM will
still be producing woefully under capacity at car plants unaffected by Monday’s announcement.
And, what if neither electrification nor automation work out? What if buyers want internal combustion engines along with a few EVs? And maybe they’ll take rides in autonomous vehicles, but not at volumes that support scale?
What then?
Small companies can become big. It doesn’t work that well to go in the opposite direction.
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