Chevy Idles Cruze Production As Inventories Build
GM has made much of the fact that its Chevrolet Cruze compact has enjoyed strong sales this year, but volume alone isn’t enough to make it in today’s car industry. The key to profitability is keeping production in line with sales, so that plants don’t overproduce, in turn forcing profit-sapping incentives to move the metal. And, as these charts show, GM has been having success selling the Cruze, but not to the extent that it needs to keep production at its current levels. The graph above shows monthly production and sales levels for this year, and it shows that GM has already tried to adjust production once to keep it in line with slower-than-expected sales. But that wasn’t enough. With sales volume dropping the last four months in a row, and inventory jumping from 33 days to 43 days in the month of October alone, the UAW is reporting that the Lordstown plant where Cruze is built will be idled for the entire week of November 28. According to the announcement
The down week is necessary to align production with current market demand. The scheduling modification is attributed to traditional seasonal buying behavior coupled with competitors’ recovering inventories previously impacted by the March earthquake in Japan.
Like a lot of recent Detroit products, the Cruze has received a lot of positive press due to its giant improvement in quality and sales compared to its predecessor. But with demand softening, and GM’s brass fretting over profitability margins as the market shifts to smaller cars, it’s clear that the Cruze’s ultimate success has yet to be proven.
More by Edward Niedermeyer
Comments
Join the conversation
Earlier this year, I was in the market for a new commuter car. I decided to not repeat the mistake of buying a one trick pony like the 2007 Prius I had (good gas mileage, but a couple of niggly electrical problems, poor comfort for long trips, and dangerous winter traction, with the inability to turn traction control off.) After testing several cars, I settled on a Cruze Eco with the manual transmission. In the 6 months I've owned it, I've put almost 12,000 miles on it with zero issues. We used it for a 2000 mile vacation trip from New England to the hottest summer weather in DC, then to PA and MI without a complaint. It's one of the more comfortable cars I've ever owned, especially for a small car. My overall fuel mileage is 39.8mpg, which doesn't hurt either. I don't always agree with some magazines like Consumer Reports. While my sample size is a lot smaller, I'll give an example. They rate the 2002 Olds Alero as a poorer than average performer and the 2002 Toyota Camry a much better than average performer. My wife has a 2002 Alero, and the only non-wear parts we've replaced are the front tie rod ends. My ex-wife has a 2002 Camry, and it's going to the shop every other month, mostly for engine and electrical issues. Both cars are almost identical mileage-wise (around 150,000 miles) We pay a small fraction of maintenance cost on the Alero compared to the ex's Camry.
Memo to GM: Gee, why not add the Cruze hatchback to the North American portfolio? There are many people in this segment that are buying your competitors cars (Focus, Mazda3, etc.) because you don't offer a hatch version of the Cruze here. Seems like a no-brainer, it's already in production in just about every other market in the world, so you don't have to go back to the drawing board, just start building the damn thing here too. Duh.
What does Michael Karesh have to say about Cruze reliability?
GM has a more limited customer base than it had pre-bailout so the old sales models won't work. Whether you agree with them or not there are millions of former customers or potential customers who won't have anything to do with GM due to the government ownership and/or GM's receipt of bailout dollars. Once it sells to those who don't care about GM's recent history it runs into a brick wall of people philosophically opposed to purchasing a GM product for any reason.