GM to lay off workers as it cuts production of Chevy Sonic, Buick Verano

Article by Christian Andrei, on June 16, 2015

Amid the sluggish demand in the U.S. for small cars, about 100 General Motors workers will be laid off as the automaker plans to reduce the output of the Chevrolet Sonic and Buick Verano by 21%. The factory workers at its Orion Assembly plant in suburban Detroit were told that plant production will be adjusted “to better align with market demand."

The workers will be laid off in phases starting in July and until the end of the year. Sources say that the output will be cut from the current 33 cars per hour at the plant, down to about 26 cars – a 21% drop. Over the past year, the factory’s production has been cut several times as gasoline prices continue to be low and as the market now favors crossovers and trucks over cars.

In January, March, and April, single weeks of downtime were scheduled at the Orion plant. Last November, GM said that 160 workers will be laid off and that the line rate will be slowed down. In addition, it wants to have one more week of downtime close to the July 4 holiday, extending it from the usual two weeks to a total of three.

From January to May of this year, Sonic sales decreased by 29% to 29,082 cars. In comparison, sales of subcompacts throughout the industry decreased by 7.2%, according to the Automotive News Data Center. A 16% drop was recorded for Verano sales with 15,279 units delivered while compact car sales throughout the industry increased by 3.8%.

Through May, GM’s car sales fell by 15%. Another reason for the shift in the market is that the car lineups of Chevy and Buick are aging, making it difficult to be competitive with newer models. GM has been selling the current-generation Sonic in the U.S. for almost four years. Meanwhile, Chevy’s No. 1 car in the world in terms of sales is the current Cruze compact, which had its launch almost 5 years ago.

In the next several months, Chevy will launch redesigns of several key nameplates, which include the Malibu midsize sedan and the Camaro. These are both set to start selling in the fourth quarter. Meanwhile, the new Cruze will arrive at showrooms in early 2016. The inventories of the two cars at the dealerships have been drastically reduced as a result of the Orion plant’s production cuts.

Early this year, the stocks of both cars have grown to very high levels. On Feb. 1, there was a 216-day supply of Sonics on dealer lots. As of June, there was a 67-day supply with 23,300 units on dealer lots or on their way to stores. The Verano had a 51-day supply with 6,400 units in lots.

In a statement, GM said that Chevy and Buick were able to achieve “a healthy level of product” in the market even as the focus of sales has been on truck and crossovers by implementing “the right balance” of sales incentives and production volumes.

The Orion plant has 180 salaried workers and 1,580 hourly employees. A total of $160 million will be invested by GM into this factory so that it can meet the 2017 target of starting production of the Chevy Bolt. On just one charge, this new electric vehicle can be driven about 200 miles.

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