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General Motors hints it could negotiate a way to keep one or more plants open

Key Points
  • GM, which announced plans last month to halt production at five North American plants, is now saying those closures are a matter of negotiation.
  • Since the beginning of 2017, GM has cut operations at its Lordstown, Ohio, factory to just one shift.
  • It's already idled 3,000 hourly employees. Just 1,500 are continuing to collect paychecks there.
An exterior view of the GM Lordstown Plant on November 26, 2018 in Lordstown, Ohio.
Jeff Swensen | Getty Images

At least one of three assembly plants that General Motors says it expects to close could find a reprieve based on the results of scheduled contract talks between the United Auto Workers and GM next year.

Detroit's biggest automaker announced plans in November to close five factories, including three assembly plants, and to cut 15 percent of its North American workforce. More than 14,000 employees are expected to lose their jobs, though GM has offered some factory workers the opportunity to transfer to other plants that may have openings.

The planned cuts have generated a political firestorm, President Donald Trump going so far as to threaten to take action against the automaker, possibly by eliminating federal tax incentives GM can offer buyers of its battery cars. It has also generated some positive press for GM's emerging rival Tesla, whose CEO Elon Musk has indicated he would consider buying the plant in Lordstown, Ohio.

The company is now giving a glimmer of hope that its plans to shutter all five plants may not be set in stone. In addition to Lordstown, the plants are Detroit-Hamtramck, Warren, Michigan, Baltimore and Ontario.

During several days of meetings on Capitol Hill earlier this month, CEO Mary Barra said she was willing to keep an "open mind" about the plant closings, though several senior insiders cautioned that it was unlikely GM would back down on the shutdowns.The automaker has also emphasized that it is required to negotiate plant closings with the UAW, which represents most of its U.S. hourly employees."The future of the (Lordstown plant and others) is a matter of negotiations," said GM spokesman Pat Morrissey.

Company officials previously told CNBC that GM isn't trying to create a bargaining ploy in a bid to win union concessions next year. They stress that the company simply has more capacity than it needs, especially for its passenger cars. If anything, several more assembly lines are at risk, including one in the Detroit suburb of Orion Township, where the Chevrolet Sonic subcompact and Bolt EV are assembled.

Trump disappointed

With an ongoing shift from sedans and coupes to SUVs and crossover vehicles, Barra emphasized that the automaker is simply trying to respond to market forces. But she and GM have come under heavy fire.

"I am very disappointed with General Motors and their CEO, Mary Barra," Trump tweeted after the cuts were announced on Nov. 26. "The U.S. saved General Motors and this is the thanks we get! We are now looking at cutting all @GM subsidies."

With the automaker targeted by an unusually bipartisan broadside, few would be surprised if it tries to at least soften the blow by holding out the prospect of saving one or more of the plants. And, as a likely battleground for both Democrats and Republicans — and particularly for the re-election bid by Trump — Ohio is seen as one of the factories that could be front and center in the GM/UAW contract talks set to begin this summer.

'Unallocated'

By then, however, the factory will already be idled. The current Chevrolet Cruise sedan being built there will be pulled from production in March, leaving nothing left to build there and the plant "unallocated," using GM's contractual language. That means there are no plans to put anything else in Lordstown.

In past years, UAW negotiators were able to keep troubled plants open, or expand existing operations, by offering concessions meant to reduce production costs. The problem the union faces is that the three assembly plants targeted by GM aren't on the chopping block because costs are too high but, rather, because demand is too low. So, reducing labor costs or improving productivity would be less of an incentive for GM than in the past, according to observers.

There are, however, "a lot of different scenarios" that could play out, said Morrissey. That could include finding new models to go into Lordstown, perhaps something competing in the booming SUV or CUV market.

Mexico to Ohio?

One possibility would be to move production of the new Chevrolet Blazer from Mexico to Ohio, though Barra appeared to dismiss that idea during her appearance in Congress.

Another possibility is to consolidate several products from other underutilized plants into Lordstown. But such a move could force the shutdown of those other factories.

For now, GM is offering many of the workers at Lordstown the option of transferring to factories whose products are in high demand, such as a truck facility in Flint, Michigan, and other facilities in Ohio and Tennessee. The Flint plant alone needs another 1,000 workers, said Morrissey, adding that there have been at least 1,100 "hand-raisers" at the plants scheduled to close who have expressed interest in moving to other factories.

Cutting shifts

The three assembly plants targeted by GM have been on the decline for some time. Since the beginning of 2017 GM has cut operations at Lordstown back to just one shift, already idling 3,000 hourly employees, with just 1,500 continuing to collect paychecks.

Even if Lordstown can't find a reprieve with GM, it just might find a new lease on life. During an interview on CBS "60 Minutes" that aired earlier this month, Musk indicated he'd be open to buying the facility. How serious he might be, Musk hasn't said, though he previously indicated Tesla will eventually need more plants in the U.S., as well as one under construction in China.

"Hey @ElonMusk. Call me," Ohio Gov. John Kasich tweeted to Musk this week. "There are no better workers than Ohio workers. And Lordstown is ready for you."

There would be a certain irony to it if Tesla were to buy the Lordstown factory. The automaker's plant in Fremont, California, was purchased from Toyota in 2010. It had previously been the site of a joint venture between the Japanese automaker and GM and was originally built and run by the Detroit automaker.