Tue | Jun 2, 2020

Dealers 'downsize'

Published:Sunday | October 31, 2010 | 12:00 AM
The 2010 Buick LaCrosse luxury sedan

LANSING, Mich. (AP):

United States automakers are thinking small. They're investing in small cars by adding compacts to their line-ups, overhauling factories and hiring workers as they prepare for government regulations due in 2016 that will require cars to go farther on a tank of gas. Even though US small-car sales have dropped lately, hurt by steadier gas prices that followed a huge run-up two years ago, automakers don't want to be caught without compacts when the new fuel standards arrive.

Last Thursday, General Motors Co said it will add a new small car to its Cadillac line-up, the same day Chrysler Group LLC said it would invest US$600 million in plant geared for small cars.

GM plans to spend US$190 million to upgrade its Lansing Grand River plant to build the car and will add 600 jobs to the plant's work force of 1,100. It didn't name the car or say when it will go on sale.

Chrysler will upgrade its Belvidere, Ill., assembly plant to build new cars, starting in 2012. Chrysler didn't say which cars would be built there, but at least one of them will likely be a small car to replace the Dodge Caliber, which is currently built at the site. The investment won't create new jobs, but the company will retain the 2,349 jobs currently at the assembly plant and a nearby parts-stamping plant.

Those announcements were only the latest in the small-car investment boom, which has also been encouraged by agreements to cut wages at some small-car plants.

Earlier this month, GM said it would start producing two new small cars - a revamped Chevrolet Aveo and the new Buick Verano - at a now-shuttered plant in Orion Township, Michigan. And Ford Motor Co is spending US$950 million to transform a Michigan truck plant into a factory that will make the Ford Focus.

Sales anaemic

Ironically, US small-car sales have been anaemic this year, overshadowed by bigger gains in the truck and sport-utility segments. Small car sales were up 7.3 per cent through September, compared to a 10.3 per cent increase in overall sales, according to Autodata Corp. Large pickup sales were up 18.7 per cent.

Aaron Bragman, an analyst with IHS Automotive, said people tend to buy smaller cars when gas prices are seeing wild fluctuations, as they did in 2008. But since gas prices have stabilised this year, people have gravitated toward larger vehicles.