RYAN GENERAL MOTORS
Andy Manis  /  AP
GM will not say which plants it might shutter, but some auto industry analysts say Janesville is particularly vulnerable. They cite the facility's age and weak consumer demand for the aging line of SUVs made there.
updated 6/13/2005 6:50:58 PM ET 2005-06-13T22:50:58

On a tour of General Motors’ oldest plant, where workers assemble Suburban, Tahoe and Yukon sport-utility vehicles, a little boy blurted out the question on everyone’s mind.

“I heard on the news the other day that GM laid off a bunch of people,” the boy told the tour guide. “Did that affect this plant at all?”

Nobody has an answer to whether GM’s sprawling, 86-year-old assembly plant — which survived the Depression, a world war, and GM’s major layoffs in the 1980s — can escape yet another round of corporate belt-tightening.

GM Chairman and Chief Executive Rick Wagoner’s announcement last week that GM would close plants and eliminate 25,000 jobs over the next three years has lots of its factory sites on edge. None may be more so than Janesville, a blue-collar city of 62,000 just 100 miles northwest of Chicago.

A closure or major downsizing would be an economic gut punch to Janesville, where GM has been the largest employer since the plant opened in 1919. GM employs more than 3,800 workers in Janesville — 5,100 if you count GM suppliers — and its $225 million payroll accounts for more than 6 percent of local wages.

Janesville’s three biggest employers — GM, Lear, Inc., and SSI Technologies — all have a stake in automotive manufacturing, according to Doug Venable, director of the city of Janesville’s economic development agency. Lear makes seats that go into GM’s trucks, and SSI produces motion sensors that go into cars to measure such things as tire rotation and gear changes.

Nearly a quarter of Janesville’s 32,000 workers are involved in manufacturing, although the sector has been slowing in recent years, giving ground to retail and health care industries in the area, Venable said. His figures show the housing market in Rock County, which includes Janesville, has seen modest price increases in recent years. So far, Venable said he hasn’t seen any changes to the housing market because of GM’s downsizing announcement, stressing the fears about the plant closing are only rumors.

GM will not say which plants could be shuttered, but some auto industry analysts say Janesville is particularly vulnerable. They cite the facility’s age and weak consumer demand for the aging line of SUVs made here.

“It’s an older plant and it produces vehicles that GM has not been doing well with,” said Jesse Toprak, a senior analyst for auto research site Edmunds.com. He predicts that Janesville is one of six GM plants that could be considered for closure over five years.

Larry Ryan, 38, who installs gas and brake pedals at the plant, said he worries about having to transfer to another plant or trying to find another job that pays anything close to his $20 an hour salary.

GM’s latest announcement “leaves all of us hanging,” said Ryan, who was sitting on his Harley-Davidson motorcycle a few hours before his shift began. “You don’t know what plants they are going to close.”

Some who have heard dire predictions in the past — just about every time GM has switched product lines — shrug off the latest warnings.

“If I had a dollar for every time I’ve heard that, I wouldn’t need my retirement checks,” said Jack Barry, 59, who retired from the plant after 37 years in 2003. “It won’t happen.”

Everyone agrees the plant is pretty safe for the next few years. GM announced last year a $175 million investment of new equipment and renovations to build the next generation of SUVs — known in the auto industry as the GMT900 series. The state kicked in $5 million to train workers and buy new equipment.

Plant spokeswoman Carolyn Markey said GM’s investment is on schedule, and workers are practicing on mock assembly lines so they know how their jobs will change when the new trucks roll out next year.

“We know we’ve got great new products coming and we’re focusing on that,” she said.

Brett Smith, an analyst with the Center for Automotive Research, said the new equipment could allow the plant to take over production of different products in the future.

“There are options, but in a lot of ways it comes down to what GM is thinking,” he said. “Any way you try to cut it, Janesville is an old plant and that’s going to make it tougher.”

High profits on strong SUV sales from the late 1990s until 2003 made the plant a cash cow for GM, but the company cut production at the plant by 15 percent to 220,000 last year as demand fell.

Analysts blame high gas prices and shifting consumer car tastes for the weak demand, which has caused the plant to idle several times this year to reduce inventory at dealerships and forced GM to rush the new lineup to market.

Janesville is one of three GM plants that assemble SUVs. If consumer demand for the vehicles stays weak, GM may consolidate those plants to two, analysts said. Janesville would probably be targeted instead of the more efficient, newer plant in Arlington, Texas, and the cheaper plant in Mexico.

The Janesville plant’s storied history started when GM decided to build Samson tractors there in 1919. The tractors were a disaster, but the plant switched to Chevys in 1923 and has assembled Caprice cars and station wagons, Cavaliers, pickup trucks and SUVs since then.

The plant briefly closed during the Depression, and a famous sit-down strike occurred in 1937. It temporarily switched to making artillery during World War II, and hit a peak employment of 7,000 workers in 1970.

These days, the plant churns out some 1,200 SUVs every day for four days a week, such as the black and silver Yukons workers were putting the finishing touches on last week.

Toprak, who ran a car dealership in Janesville in the 1990s, said the new line’s success or failure likely will determine the plant’s fate. He said GM will get a bounce in sales when the new products hit the market next year, but whether it lasts a few months or a few years will be key.

“Because of the strength of the products that this plant previously produced, they felt like they were immune to any kind of closings,” Toprak said. “The worry is more real now than it was before.”

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