Why General Motors Is Shutting Five U.S. Factories Next Month

December 19, 2016, 5:47 PM UTC
2016 Chevrolet Cruze front 7/8
The 2016 Chevrolet Cruze.
Courtesy of General Motors.

General Motors will shut five U.S. auto assembly plants for varying durations in January, primarily to cut oversupply of sedans which have fallen out of favor among U.S. consumers.

GM confirmed on Monday information from sources at the United Auto Workers union who said that the five plants will shut.

GM had built up inventory recently and will be cutting back on that supply after the end of the current year. In October when it reported third-quarter earnings, GM said it has increased its U.S. dealer inventory by 111,000 vehicles.

GM at end-November had 84 days of U.S. supply of unsold new vehicles, up from 79 days at the end of October. GM said that days supply figure would “fluctuate before moderating at year-end.”

A company spokesman said on Monday that it is targeting about 70 days of inventory.

Several Wall Street analysts, including Brian Johnson of Barclays, have said that if GM plants close to level out its inventory, it would pressure GM shares.

At about midday Monday, GM shares were down about 0.4 percent at $36.24.

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Shut for three weeks will be the Detroit-Hamtramck plant in Michigan and the Fairfax factory in the Kansas. Down for two weeks will be the Lansing Grand River plant in Michigan, and down for a single week each will be the Lordstown plant in Ohio and the Bowling Green factory in Kentucky.

In November, GM announced the layoff of about 2,000 workers with the suspension of third shifts at the Lordstown and Lansing Grand River plants, also in January.

The Lordstown plant builds the compact Chevrolet Cruze, and the Lansing plant manufactures the Cadillac ATS and CTS. Sales of each of those models are down about a fifth from year-ago sales.

The January shutdowns were reported earlier by The Detroit News.