General Motors Co said on Tuesday it will spend $877 million to overhaul its pickup truck factory in Flint, Michigan, capping a series of investments to keep production of profitable large pickups and sport utility vehicles rolling through a significant model change expected in 2018.
The Flint investment is part of a plan to expand three U.S. truck plants to install new assembly lines, body welding shops and paint operations for future generations of Silverado pickups and SUVs such as the Chevrolet Tahoe and Cadillac Escalade, while still running the operations that build current models.
In the past, GM and its domestic rivals would shut down production for weeks to retool for new models, stockpiling vehicles in advance and then discounting them once the new model appeared.
People familiar with the company’s plans say GM's next-generation pickups and SUVs will make use of various materials, including aluminum and lightweight steel, to shed weight and gain fuel efficiency to meet tougher federal standards. Assembling the new vehicles will require substantially different equipment than the tools GM uses today.
GM does not want to “take the whole facility down for six months and go dark in the market,” Cathy Clegg, head of North American manufacturing, told Reuters, without saying when model changes for the large pickups or SUVs will come. GM factories in Flint; Arlington, Texas, and Fort Wayne, Indiana, together build about 60,000 trucks a month, according to Automotive News data. Analysts estimate those vehicles generate $10,000 or more in operating profit each.
New paint shops at the truck plants also could allow GM to build vehicles that are larger than the current models, and cut costs at the same time, company officials said.
GM’s plan to keep truck plants running through a major model change contrasts with Ford Motor Co's (F.N) approach to retooling factories to assemble its aluminum-body F-150 truck. Ford in 2014 lost about 13 weeks of production at pickup truck factories in Dearborn, Michigan, and Kansas City, Missouri, as the plants switched from the old, steel truck to the new, lightweight model.
GM has announced a total of $5.4 billion in investments in U.S. plants since April, including the truck plant overhauls. The company also outlined upgrades to other operations, including a small car assembly operation in suburban Detroit, and an expanded facility in Warren, Michigan, that allows engineers and workers to test production systems before they are installed in a plant.
The investments could help GM in its effort to set the framework for the new labor agreements the United Auto Workers union is negotiating with the Detroit Three automakers. Securing jobs at U.S. factories is a top priority for union leaders.
Clegg said the UAW's willingness to accommodate three-shift-a-day production at its truck and SUV factories is critical to the company’s efforts to boost output to meet a boom in demand.