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Strategies & Market Trends : Contrarian Investing
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To: pcyhuang who wrote (2169)6/4/2008 8:21:48 AM
From: robert b furman  Read Replies (1) of 4080
 
Hi pcyhuang,

Just a small note about GM.

Their announced N.American plant closures - which supposedly signal the end of demand for big trucks and SUV's is as follows:

The closure of the Trailblazer plant - These are old technology mid sized SUV's that have been displaced to the rental company fleet for over two years.Their replacements are fast selling hard to get crossovers :Acadia and Enclave

The closure of the Janesville plant:This does eliminate the oldest suburban plant in the system.Famed for a high quality work force - Wisconsin is a long way to transport V-8 engines and Transmissions made in Detroit area.What really was the killer is GM has just sold their Med Duty truck line to Navistar.Med Duties are also made at Janesville thus the double whammy on Janesville.

The closure of the Oshawa plant does reduce production of the best selling 1/2 ton full size truck - Crew cabs.This truly shows a reduction in demand of a staple product.It also smacks the more radical union workers who are represented by UAW of Canada.

The closure of the Kodiak plant in Mexico is again the result of the sale of Med Duty truck operations to Navistar.This plant is located in Mexico and my bet is the 1/2 ton crew cab plant that was shuttered by the American Axle strike(Detroit) for 11 weeks will find itself being made in Mexico,where American axle has an operatinig axle plant that DID NOT STRIKE and actually allowed intermittent production of full size trucks and SUV's during the Detroit UAW strike on American Axle.

The bottom line:

A wind down a sold division.
A windown of two old product lines (Trailblaxer and Envoy) that have slowed in retail sales and are now rent vehicle staples
The shuttering of two plants (suburban - for which there already is a replacement plant in Salao Mexico,and the shuttering tof a 1/2 ton crew cab plant - that I bet finds itself in Mexico.

If the boys in the UAW aren't cheering about the multiple death slaps handed to them by MORE outsourcing to Mexico/South Korea/China/India - it is because they're blind to the fact that as they strike - they lose more and more - Everytime they strike.

GM is accelerating their move from high cost labor in N.America and well ahead of most in being the #1 or # 2 global maker of vehicles,a smaller and declining percent of which are made for sale in the USA - OUTSIDE OF THE USA.

This is called margin expansion!!!
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