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Reuss Likes GM’s Current Capacity Position

The executive says he’s satisfied running at the current clip, even if it requires creative ways to satisfy demand on products such as the Chevrolet Equinox.

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New York Int’l Auto Show

NEW YORK – General Motors is in good shape with its manufacturing footprint in the U.S., says Mark Reuss, president-North America, giving little indication the auto maker plans to reopen any idled facilities in the near future.

GM has two major assembly plants on standby in Janesville, WI, and Spring Hill, TN. Much of their tooling remains intact, giving the auto maker the option to bring them back online quickly if extra capacity is needed.

Sales are generally improving, too, leading to an uptick in production. According to Ward’s data, industry first-quarter output grew 15% in the U.S. from year-ago and 16% across North America.

GM’s production was up nearly 18% in the region, pushing its capacity utilization over 100%. Generally, auto makers want to build close to – or beyond – 100% capacity to maximize profitability. Some GM plants operate over that benchmark and some below, depending on the vehicles they build.

Reuss says he’s satisfied running at the current clip, even if it requires creative ways to satisfy demand on products such as the Chevrolet Equinox and GMC Terrain cross/utility vehicles.

To put more in the market, GM ships unfinished Equinox bodies from its Ingersoll, ON, Canada, assembly plant, which operates around the clock, to nearby Oshawa, ON, for final assembly.

“That’s the way we want to run the business, be very agile” he tells Ward’s after introducing the redesigned-for-’12 Chevy Malibu at the New York International Auto Show.

“We have large things happening in the world today and we’ve got some big things from a customer standpoint that can change, and trying to forecast that is very hard to do,” Reuss says, recalling the Japan crisis and rising fuel prices that can abruptly disrupt supply lines and alter consumer preferences.

“But what we can do, though, is have the capacity base and product-development portfolio that is agile enough to handle those things.”

Underscoring GM’s cautious approach, Ward’s forecasts GM will build at 118% of year-ago volumes during the second quarter, while industry output will drop from the first quarter due to parts shortages out of Japan.

Prior to bankruptcy, GM ran its plants even if demand did not exist so it could cover massive structural costs. It would then discount the vehicles to move them off dealer lots, which hurt profitability. And when gas prices spiked in 2008 and its product portfolio was truck-heavy, sales disappeared altogether and helped send it into a tailspin.

Reuss introduces the Malibu here, a bread-and-butter midsize sedan, launch of which was pulled ahead by some four months in anticipation higher demand for fuel-efficient passenger cars.

The new Malibu, due in February, will not receive a 6-cyl. engine option like the current model, and the first version to hit dealers will be the Malibu Eco variant featuring GM’s fuel-saving eAssist start/stop system.

The technology will appear first on the Buick LaCrosse and Regal. On the Malibu it promises fuel economy of 26-38 mpg (9.0-6.2 L/100 km) city/highway.

“We’re sending a message here,” Reuss says. “We’re leading with the Eco model version of this. That’s an important visual move on how General Motors is attacking these segments of cars. We’re going to go at it.”

The current-generation Malibu, which earned North American Car of the Year honors when it bowed with the ’08 model year, has sold more than 600,000 units in North America and a handful of export markets.

The new model will be sold around the world and built at new global locations in addition to Fairfax, KS, and Detroit-Hamtramck, if demand warrants.

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