With billions of Canadian dollar investment, General Motors (GM) announced that they will be bringing back their operations in their Oshawa assembly plant in Ontario, Canada. According to GM’s CEO Mary Barra, they plan to increase the production of their highly profitable pickup trucks to help meet the continued demand for their full-sized trucks.
Will this billion-dollar investment to Canada ignite GM’s continued rising sales for the coming years?
Bringing back Oshawa Assembly Plant
Back in 2005, the Beacon Project was introduced to represent a significant investment for Canada. GM has invested more than 2.5 billion Canadian dollars in that project. It helped in securing more auto sector work by making it more enticing to invest in the country.
GMC truck production at its Oshawa assembly plant is scheduled to begin in 2022. The investment of General Motors in the assembly plant in Canada will strengthen their Ontario operations. This move has been hailed by labor leaders and politicians in the country. The expansion of truck production in their plant in Canada will make a bigger player on the global automotive map.
Unifor—the union representing the hourly workers in Canada—met with the Detroit automaker for a new labor agreement to bring back GM’s truck production. Barra told the analysts that GM is planning to bring back production of its Chevrolet Silverado and GMC Sierra trucks to the Oshawa plant.
Before they ceased the operations in the Oshawa plant, light-duty GMC Sierra and Chevrolet Silverado double cab pick-up trucks were assembled in the facility. It was a part of GM’s Innovative shuttle program where the panels are stamped for the trucks at the plant in Fort Wayne, Indiana. For the full final assembly of the trucks, it is done in the plant located in Ontario, Canada.
Oshawa Plant closure
GM’s Oshawa facility was once one of the biggest auto assembly plants in the world. However, in 2019, the company said they will close the plant as part of a global restructuring plan.
Different sedans, trucks, and even Camaro muscle cars had been produced in the Oshawa plant. In its early years, Pontiac, Chevrolet, and Buick models were also produced. In 2008, it was converted into a flexible manufacturing facility for faster switches between models and assembly lines. GM said the Oshawa assembly plant has the capability of building both cars and trucks in the same facility, and it was the only plant in North America that can do it.
GM’s dire financial straits struck its branch in Canada. The closure affected many GM workers across the region. In June 2009, they announced that the jobs will be cut, including the Canadian dealerships which are close to 40 percent.
The company filed for bankruptcy protection in the U.S. Bankruptcy Court. They stated 82.29 billion US dollars in assets and 172.81 billion dollars in liabilities at the end of that fiscal year. The Canadian federal and the Ontario governments provided about 9.5 billion US dollars for financial aid to GM.
GM deal with Unifor
General Motors has stopped manufacturing at its Oshawa plant in 2019 which affected the jobs of many employees working there for many years. But due to the surprising rise in the sales of their auto products, GM is ready to invest in a bigger production. The unexpectedly high demand for GMC trucks during the pandemic turned Oshawa’s production back.
The ratification of the 2020 agreement between GM Canada and Unifor will bring the pickup truck production back to the Oshawa assembly plant. This has marked a major victory for Unifor and a huge step for the Canadian subsidiary of GM.
Unifor represents about 20,000 workers at different Canadian auto facilities. With the deal in place, they are expecting to hire between 1,400 and 1,700 hourly workers and begin the production in January 2022.
The largest achievement of Unifor for going into negotiations with the Detroit automaker was to get more investments at its plants. GM’s agreement with Unifor includes job security, significant investments, as well as economic gains. As a result, eighty-five percent of the 1,600 Unifor members at the GM plants in St. Catharines, Oshawa, and Woodstock voted in favor of a new three-year collective contract.
GM Canada President and Managing Director, Scott Bell said, “This agreement provides new product investment for our highest volume products which are the number one segment in Canada.” Also included in the agreement is the creation of an anti-racism action plan that aims to establish a new Racial Justice Advocate in the workplace. GM plans to provide up to 10 days of paid leave in cases of domestic violence.
With GM’s billion-dollar investment, it will bring back thousands of jobs. It will also further the growth of the company’s Canadian operations. There will be jobs at all three Canadian sites, including at the Woodstock Parts Distribution Center. The company also has more than 109 million US dollars for the Corvette production, as well as the continued support for V-8 engine production in St. Catharines.
The Oshawa assembly plant will go back online in 2022. GM will be starting to produce both light- and heavy-duty trucks. In the St. Catharines plant, they will be producing engines for the pickup trucks.
GM trucks against competitors
We have seen how the pandemic has exhausted many sectors and businesses, including the auto industry. Ford has slumped and fallen behind General Motors in terms of their truck sales, while Fiat Chrysler Automobiles came in third.
The battle is neck and neck with the prominent automakers but the numbers aren’t that far. The first-quarter results of 2020 showed an overwhelmingly positive start for GM. The Detroit automaker has sold more full-size pickup trucks compared to Ford Motor Company and Fiat Chrysler Automobiles—two of its most direct competitors. Also, Chevrolet Silverado outsold the Ram Pickup in the first quarter.
The GMC truck Sierra and Chevrolet’s Silverado saw strong demand during the second quarter. During that time, an 11.6 percent decline in cumulative sales volume happened because of tight inventories brought about by the pandemic. But the company was hopeful and stated that they had solid demand for the two full-size trucks.
Since the launch of the 2019 Silverado 1500, the Chevy pickup truck has been outsold by Ram. The strategy of GM paid off when they launched the new Silverado and Sierra. Instead of the more affordable lower-end models, the company decided to initially launch the high-feature, lower-volume models. They have kept the incentives low and average transaction prices high. The figures speak for themselves because the first-quarter sales of GM for 2020 has been impressive. It is the result of their strategy that optimized the revenue and profitability of their truck offerings.
The pickup trucks are highly profitable and account for a significant portion of GM’s sales.
For the combined units of Chevrolet Silverado and GMC Sierra, GM sold 197,743. The pickup trucks under its two brands accounted for 37 percent segment share. It increased to 7 percentage points compared to the 30 percent share in the quarter last year.
High demand despite the pandemic
Since the pandemic started, there have been limitations on land and air travel. Many people are even avoiding traveling via bus, plane, or train.
RV and boat sales are now booming in Canada, while the demand increased in the United States. That is why a lot of consumers are eyeing to buy reliable large pickup trucks that they can use for hauling their boats or RVs. They can modify it with truck parts and accessories they can buy from 4Wheelonline. In that way, they can improve the performance, reliability, and functionality of the vehicle.
Lockdown measures have been implemented not only in the US but also in other countries to control the virus outbreak. The carmakers had no choice but to shut down their production. But surprisingly, a lot of people who can still afford new cars—want new vehicles as badly as ever.
Pent-up demand from people who put off their vehicle purchases before the pandemic was boosted—thanks to federal stimulus checks and low-interest rates. After the eight-week production shutdown, GM tried to catch up with the demand.
As the industry recovered, the retail sales of Chevrolet and GMC trucks improved. GM has even commended its dealers who used online shopping tools to get customers. Dealers are using a combination of customer-facing and online technologies. You can order a pickup truck using the “Shop. Click. Drive” offer from some GM dealers. They found an effective way to attract customers and sell vehicles even though the inventory levels are tight.
What pushed the investment
On November 5, GM revealed that they earned bigger than what they had a year earlier. The company reached 4 billion US dollar income out of 35.5 billion US dollars in net revenue. CEO Barra said that GM’s third-quarter earnings call the expansion of their truck manufacturing.
GM Canada’s vice president in sales, service, and marketing, Sandor Piszar, said that Canada truck sales achieved solid year-end results in 2019. He emphasized that their dealers reported strong demand for vehicles. The customers want to have a vehicle with utility and hauling capability. The hot sellers are the large pickups, new crossover, and SUVs.
During the third quarter of 2020, the sales in the US market decreased by 10.5 percent for Buick, Chevrolet, Cadillac, and GMC trucks. But even with the decrease in third-quarter sales, GM saw some significant momentum with the pickup sales.
The retail sales of pickup trucks showed some signs of recovery. This has led to the company’s market share gain in the third quarter of 2020. Kurt McNeil, GM vice president sales operations in the US, mentioned that dealers are selling a high mix of large pickups. They noticed that large SUVs and full-size pickups, most especially Chevrolet and GMC trucks, are selling incredibly fast.
With its year-over-year sales growth, it made the GM sales rebound in September. The sales improved sequentially each month within the third quarter of 2020 which showed a sign of a recovering industry sales. Both light and heavy-duty variants of Chevrolet Silverado and GMC Sierra pickups continue to catch the attention of both American and Canadian consumers. Even the specialty models like the GMC AT4 and Denali made with dually wheels are leaving good remarks.
The Detroit automaker cited the strong truck sales as the primary driver behind their multi-billion profit for the truck production in Canada. They may seem to focus on full-size truck manufacturing because of their plan for the Oshawa plant. But they will keep on producing the right mix of vehicles to meet demand.