GM's Chevy Sonic plant: More than cheap labor
This summer, General Motors will start building the Chevrolet Sonic, which will be the only subcompact car produced on U.S. soil.
Nobody else is making a small car here because, historically, they've been money losers. So how does GM expect to turn a profit?
The short answer is cheaper labor. As is well known by now, the UAW cut a deal with GM in the dark days of 2009 that allows GM to run the plant with 40 percent of the workers at a "second-tier" wage, about half of the nearly $29 per hour that veteran UAW-represented GM workers make.
But GM says it's more than that. It spent roughly $600 million overhauling the Orion plant to eliminate the sort of flab and inefficiencies that just won't cut it in a small-car plant.
Now GM is showing off some of those lean techniques, as about 1,600 workers gear up for the start of Sonic output. Production of the Buick Verano compact will start soon after.
GM invited reporters into the plant today for a peek at little ways in which it's trying to preserve precious small-car margins. Some examples:
- A tighter layout leaves room for GM to receive shipments from suppliers on site, rather than storing parts in an off-site warehouse. Eliminating the use of hourly shuttles to haul parts back and forth will save $10 million a year.
- Two suppliers work in-house -- a rarity at a GM plant -- to supply brackets and other parts in real time. GM says that cuts costs and logistical headaches and makes it easier to fix quality snags.
- About 30 percent of the 3,200 parts used at the plant will come from overseas (and presumably less-expensive) suppliers. A typical GM plant gets just 5 percent of its parts from overseas.
As a bonus, GM gets to buff its green-company image. The new paint shop is partially heated by landfill gas and uses about half the energy as the one it replaced. It's using recycled cardboard and scraps of old jeans in the headliner for the Verano. More-efficient lighting will shave nearly a half-million dollars a year.
GM won't say just how much its leaner operation might contribute to Sonic's profit margin, versus the savings from the UAW labor deal. But it's a pretty safe bet that the labor component accounts for the lion's share.
Still, after getting trounced in the small-car market by the Japanese and their lean-manufacturing ways for decades, any effort by GM to tighten its manufacturing processes can't be a bad thing.
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