GM Wrestles with Excess CapacitySource: Colias, Mike. "GM's Conundrum: Too Many Factories Making Slow-Selling Cars." https://www.wsj.com/articles/gms-conundrum-too-many-factories-making-slow-selling-cars-1507571555?mod=itp&mod=djemITP_h, posted

10/9/2017.

Despite its drastic downsizing a decade ago under a federally funded bailout and bankruptcy restructuring, General Motors again finds itself with too many U.S. factories that can turn out too many vehicles.GM's factory-utilization rate in North America averaged 95.1% over the past two years, below Ford's 111.9% and Toyota 's 101.4%. (Rates can exceed 100% when factories work a 3rd shift or schedule overtime work on weekends.) The auto industry often runs its factories dawn-till-dusk or even around the clock to boost their efficiency.Part 2Factory-utilization rates typically measure how much production capacity a plant uses based on a 16-hour workday. GM says its utilization rate is 100% on average when its round-the-clock truck and SUV lines are figured in with the relatively sleepy factories making cars.GM said it is working to "drive further improvements" in its plant utilization, including adding crossover SUVs to more factory lines. A plant in the Kansas City area that now makes only the Malibu is scheduled to begin assembling a small Cadillac SUV soon. But such a switch-over typically takes car makers several years of lead time, to order and install new assembly-line equipment and tooling.Part 3GM operates 17 vehicle-assembly plants in North America, after closing several during its bankruptcy. Most, except for 5 that operate around the clock to build trucks and SUVs, have ample unused capacity.Part 4Critical Thinking Questions1. Why is capacity a critical auto industry issue?

A.

Auto sales drive how many hours a plant runs the following week.

B.

Plants are very expensive to run and to keep idle.

C.

The auto workers' union decides when to close a plant.

D.

GM's capacity is less than that of Ford or Toyota.

Part 52. GM's recent factory-utilization rate in North America

A.

is less than that of competitors.

B.

is perfect.

C.

exceeds that of competitors.

D.

cannot exceed 100% by union regulation.

Part 63. How can utilization exceed 100%?

A.

utilization is only based on 16-hour days

B.

when a 3rd shift is used, utilization rates go up

C.

overtime can drive utilization higher

D.

All of the above.

Part 74. How can GM improve its utilization of plants?

A.

It can eliminate the unpopular Cadillac brand.

B.

It can adopt better quality programs like TQM.

C.

It can build additional smaller plants.

D.

It can make more popular vehicles in various plants.