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General Motors (GM) Scraps Investment Plan for Orion Plant

General Motors Company GM has canceled plans to invest $245 million in its Orion plant in Michigan, per media reports. This investment was meant to be used to equip the plant for manufacturing a small Cadillac. The automaker is now planning to produce the Cadillac luxury product – which will compete with other premium small cars – at the Fairfax facility in Kansas City, KS. This plant mainly produces Chevrolet Malibu and employs 3,200 workers.

General Motors has adopted this policy to reduce its cost of production. This strategy is part of the company’s product allocation process, under which it focuses on building vehicles in a cost-effective manner. This will ultimately benefit customers and the company’s overall business.

However, this strategy will adversely affect workers at the Orion plant. They have been dealing with uncertainty since a long time due to product mix. Though the plant produces a small Buick and Chevrolet with conventional engines, it operates at lower capacity and efficiency levels compared to other U.S. plants. General Motors intends to start production of the Chevrolet Bolt electric vehicle at the plant by the end of this year. However, the electric vehicle market is facing overall sluggish demand due to cheap gasoline prices.

Not only General Motors, but other automakers are also facing challenges in producing small vehicles at factories in the U.S. Ford Motor Co. F and Fiat Chrysler Automobiles N.V. FCAU said that they are considering shifting their small vehicle production from the U.S to Mexico.

General Motors currently carries a Zacks Rank #3 (Hold). Cooper Tire & Rubber Co. CTB, carrying a Zacks Rank #1 (Strong Buy), is a better-ranked automobile stock worth considering.

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FORD MOTOR CO (F): Free Stock Analysis Report
 
FIAT CHRYSLER (FCAU): Free Stock Analysis Report
 
COOPER TIRE (CTB): Free Stock Analysis Report
 
GENERAL MOTORS (GM): Free Stock Analysis Report
 
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