General Motors Corp. said Friday it will temporarily close 20 factories across North America and make sweeping cuts to its vehicle production as it tries to adjust to dramatically weaker automobile demand.
GM said it will cut 250,000 vehicles from its production schedule for the first quarter of 2009, which includes a cut of 60,000 vehicles announced last week. Normal production would be around 750,000 cars and trucks for the quarter, spokesman Tony Sapienza said.
Many plants will be shut down for the whole month of January, he said, and all told, the factories will be closed for 30 percent of the quarter.
This is a big blow to the auto industry people as well as to all of the countless numbers of small companies that support the auto industry. This news comes just as the holiday season is fast approaching. This may be what GM thinks is required to end the crisis but it is certainly the wrong action. There is a much better solution to ending the crisis. If sales are drastically down and you have thousands of vehicles that are not selling then it would be logical and financially sound to do something that would reduce your stock, not reduce your workforce.
The solution for all three US automakers is a sale. Drastically reduce the price of the vehicles that aren’t selling. Accept more loans instead on requiring the consumer to walk in with cash in hand. Today with the majority of people locked into pricey mortgage payment who has cash to buy over priced vehicles. Lower the price on all trucks and cars that are the least fuel efficient. Give fair market value for a trade-in instead of refusing to take in any trade-ins. Smaller dealerships can sell the trade-in for you and you can recover the cost and gain a huge chunk of the market. Most people with mortgages can’t afford a pricey fuel inefficient vehicle. Most consumers only have what they have as a trade-in as their deposit on a new vehicle. If you have bargains and you are willing to bargain you can and will gain back the market. Look at how many times a consumer goes into a new car dealership looking for a good deal. If the dealership isn’t willing to deal then the majority of times the consumer will just walk out and go looking for someone who is willing to make a deal.
If you have a product that is over priced, it doesn’t matter how much gadgetry it has and it doesn’t matter how good you and your dealership looks, your product isn’t going sell. If the Big 3 really don’t want to go bankrupt and they can’t convince the government to bail them out then it time to take the appropriate action and have a sale. If you have a truck that your are selling for $34,000 and you know it cost $15,000 to actually produce doesn’t it make sense to lower you cost to a dollar figure that a consumer would accept? We live in a society that is just too expensive to live in. As a result we are forced to adapt by looking for and buying what is affordable. The only solution to the auto industry crisis is holding a global factory direct pricing sale. You don’t have to do it permanently, just until the crisis passes.