While Toyota has frozen its full-size pickup truck and SUV production lines, GM is, surprisingly enough, about to do the opposite. A few months ago, GM announced production cutbacks at the Arlington, Texas plant that produces the Yukon, Tahoe, Suburban, Escalade and Dual-Mode Hybrid SUV’s. In addition to the usual two-week summer break, the plant was scheduled to be closed for five more weeks through the rest of the year. Ostensibly, the cutback was designed to prevent the trucks from piling-up on dealer lots. Starting next month, the previously laid-off workers will be back for an additional four-and-a-half hours overtime per week, plus a few Saturdays. GM cites the recent decline in gas prices and hefty incentives as the reason behind the volte-face. The General claims the “back to work you scurvy bastards” decision has nothing to do with the impending December 2008 closure of Janesville, Wisconsin plant–that also builds Yukahoes. Nor anything to do with future production cuts. What say you?
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Russian exports?
Perhaps they want some last ditch profits and figure they can cash in on the lowering fuel prices.
TomAnderson, I think the local Chevy dealer would be perfectly happy to send his legions of Tahoes to Russia; no need to build more.
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The proposed loan to the Big 3 to help “retool” to build fuel-efficient and advanced tech vehicles sure looks like a bad joke against any increase in SUV production. Or maybe the increase in SUV production looks more like a slap in the face.
Still, with gas at $2.46, perhaps GM thinks consumers memories are so short, they’ll buy more of these things and help shore up GM’s cash posiiton.
And perhaps GM’s right.
These are the best looking SUVs ever to come out of GM. Even better than the late 90s 2 door Yukon/Tahoes.
To rub it in my god damn face, that’s why.
I live in Janesville, WI.
They’re taking a risk — they can spend their resources making barely profitable cars, or, what seems to be happening here, they realize that gas is going to be lower for two reasons:
1. The economy stinks, so short-term demand will fall (and the China argument has very little bearing here — California alone uses almost as much as China, with some estimates showing us using more).
2. The Democrats are going to take office, which means they will eventually start re-regulating oil speculation. This will practically set a ceiling on oil prices.
So, they’re weighing two options: high-risk, low-profit cars, or slightly higher-risk, high-profit SUVs and trucks. Considering how fickle the public is, which would you choose? Now factor in how desperately they need cash, how much pressure they face from unions, etc. and this makes sense short-term.
They’re not looking past the next year by the looks of it.
Auto mfg is a complex business. Not knowing the numbers it’s hard to judge what GM is doing. Given how mature the platform is, it’s not a stretch to find that it might be one of the cheapest to manufacture. If there’s supplier’s agreements for a minimum quantity of parts supplied or penalties will be accured, again it may be cheaper to build them than not.
This, of course, is all blue sky supposition but possibly valid.
A new president means new vehicles for the Secret Service—Tahoes and Suburbans. They probably have thousands stashed all around the world that need to be replaced/supplemented.
I don’t know why they have decided to ramp up production, but this is perfect example of what bumbling fools they are. They cut production earlier in the year only to increase production to the point that they are now paying overtime to their employees; thereby, increasing the number of dollars spent on labor per vehicle. That’s what I think every shrewd business person does when losing money, try to increase costs. I guess paying overtime was just the most convenient way for GM to piddle away some more money.
Maybe GM is simply concentrating all large SUV production in Texas, the biggest market for Suburbans since forever. Building everything in one factory, even with some overtime, is probably cheaper than splitting production between multiple plants.
Year ago before the SUV bubble Texans bought fully half of all new Suburbans. Folks often called ’em Texas Cadillacs. I don’t think the Texas big SUV market is about to evaporate.
If ANYONE rushes out to purchase a guzzler right now, and then has the guts to B&M about gas prices when they go back above $4/gal, they should be either ignored or put out of their short-sighted misery.
I would like to think that this severe rise in gas prices has rattled people enough to force them to realize that we are no longer the only top dog in the oil consumption market and that any blip in supply will have gas stations placing a “4” in the first column on their price sign. I also think the near (or total) collapse in the credit markets are going to go against people buying expensive guzzling trucks/SUVs/crossovers.
Also, since 3+/gal gas became the norm, the same three words have been said over and over again. Those words are “China” “and” “India.” They suddenly didn’t stop buying crude during our downturn. That’s why I see gas prices slowly creeping upward again. I’m wondering if the first nationwide cold spell will kickstart that.
Last but not least, I can’t speak for the rest of the country, but here in SW Ohio, in slightly longer than two months, we’ve fallen from $4.30/gal (for regular unleaded) to $2.35-$2.45/gal. Across the river in Northern Kentucky, gas prices are still .30/gal more expensive.
Have the prices in your neck of the woods seen an almost $2/gal drop in 8 or so weeks? With all of the driving I do, I love saving what will add up to at least a couple of hundred bucks a month!
GM probable thinks the average person has the memory of a goldfish.
It’s the gas prices, stupid (to paraphrase)! At $2.35/gal in some places, I’m sure GM is not only hoping, but counting on the general consumer’s extremely short memory. And yes, when the prices go back up again (as they surely will), all of those shiney new Yukaburbahoe owners will lament how unfair it is that they have to pay through the nose to fill them up. Americans, as a rule, do not like history and tend to forget things quickly.
I disagree.
Nothing changes human habits more quickly and permanently than trauma. Consumers will not forget the you-know-what at the pump in a hurry.
It’s not a question of intelligence, but of simple [economic] survival.
GM is a company that is driven by numbers. So I’m going to guess that it has something to do with trying to hit numbers.
My guess is that they want to hit some sales number, so that they can “prove” that GM is positioned to grow in 2009. Being able to say that “GM SUV sales went up X%” will earn them headlines for another day, even if they have to give them away — the media will report the sales figure, not the incentives that got them there.
I’d put lower odds on this, but it may also be the first step toward killing the Volt, which is behind schedule and probably over budget. If SUV’s sales can be made to look as if they are growing again, GM could eventually use a market-based justification to kill off the Volt, even though they really would be motivated to cancel it just because they can’t make it work.
Folks, don’t forget that a Suburban that is loaded with a family going on vacation or even to soccer games is still a fantastic vehicle that is efficient and capable. Not all large families can fit in Mazda 5’s. Yes, demand will be way down on these because people will stop using them for personal transportation (and that is a very good thing). That’s what we’re seeing now. But the Suburban is still the ultimate family carry-all, and there will always be some demand for them. Their buyers are, for the most part, not the bumbling idiots that many of you like to characterize them as.
There are currently no 8 passenger vehicles on the market with more than high 20’s in mpg’s on the highway–don’t forget that. The first company to make such a vehicle that does north of 30 on the highway has something great to market.
I doubt that lower gas prices will be enough to boost sales of new Tahoes and Suburbans. Many of those vehicles were financed with home equity loans. Given the bursting of the real estate bubble, that source of financing is gone for many people. They will have to pay for those vehicles out of their income, and most people simply do not have the income to buy a brand-new Tahoe or Suburban.
The bottom line is that the housing boom allowed many people to buy vehicles that they otherwise could not afford. Now the party is over. In the future, the real action will be in the $18-24,000 price bracket. If GM can’t make money by selling vehicles at those prices, it is toast.