By Mike Colias and Ben Foldy 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (May 23, 2020).

A shortage of parts from Mexico is hampering General Motors Co.'s plans to quickly ramp up production of high-profit pickup trucks, according to a union official and other people familiar with the matter, underscoring the auto industry's halting restart after a two-month shutdown from the pandemic.

GM has delayed plans to roughly double output at its two main U.S. pickup-truck factories by adding additional shifts of workers next week, these people said. The auto maker doesn't yet have the flow of parts it needs to accelerate production as planned, they said.

Companies trying to get their businesses back on track amid the Covid-19 pandemic face a choppy landscape, including the threat of supply-chain disruptions and worker infections or government restrictions that can halt operations.

GM is prioritizing large pickup trucks as the auto maker restarts North American operations, executives have said. The company is scrambling to replenish thin dealership lots and also needs to jumpstart cash flow, after burning through billions of dollars over the last few months amid the industry's shutdown.

At its Fort Wayne, Ind., truck factory, GM postponed plans to call back roughly 1,300 workers who were supposed to start Tuesday for a second eight-hour work shift, said Rich LeTourneau, an official at United Auto Workers Local 2209, which represents workers at the factory. The return date tentatively has been pushed back to June 1, he said, citing shortages of components from Mexico as the reason for the delay.

"We continue to plan to ramp up production in a gradual cadence," a GM spokesman said, declining to discuss specifics about the schedule.

GM also delayed adding a second work shift at its Flint, Mich., pickup factory, which makes GM's largest, priciest pickup trucks, some of the people said.

More than 1,000 additional employees had been scheduled to come back Tuesday, but those plans have been delayed and workers haven't been given a new callback date, the people said.

U.S. auto makers are juggling supply-chain kinks and putting in new safety protocols as they try to restart operations following an unprecedented eight-week shutdown to prevent the spread of the new coronavirus.

Combined, the Flint and Fort Wayne factories accounted for about 62% of GM's output of large pickup trucks last year, data from researcher Ward's Intelligence show.

Mexico, which is a major source of auto parts for U.S. factories, has experienced a slower reopening of its plants, with the country's health officials requiring manufacturers to first get permission to resume work before the official restart date of June 1. Some factories in Mexico began reopening this week, but the reboot of operations has been gradual.

In the U.S., GM, Ford Motor Co. and Fiat Chrysler Automobiles NV resumed limited work at most of their factories this week, with plans to ramp up output in coming weeks.

Two of GM's Mexican engine and transmission plants began reopening Thursday night, and two assembly plants -- including its third main pickup-truck plant, in Silao, Guanajuato -- began operations Friday, a company spokesman said.

The slower start at GM's truck plants and multiple Covid-19-related disruptions at two key Ford factories this week are reminders of the challenges the industry faces as it tries to crank up production.

Any disruption in pickup-truck production is especially problematic for the Detroit auto makers, which derive much of their profit from the hulking vehicles. It is of particular concern for GM, whose inventory of large pickup trucks has been running leaner than that of its competitors, partly a hangover effect from a 40-day United Auto Workers strike at its U.S. factories last fall.

GM also had steady truck sales in April, leaving dealer stocks further depleted.

Pickup trucks have been relatively strong sellers in an otherwise dismal sales environment for auto makers, who in April reported a roughly 50% drop in sales overall and continued weakness heading into May. By comparison, pickup truck sales fell only 21% in April and helped lift results for GM, Ford and Fiat Chrysler, which benefited from many big truck-buying states in middle America not getting hit as hard by the virus as on the coasts.

The relatively swift selling pace for trucks, however, has dented inventories and dealers now worry it will take a while to replenish stock with factories at limited output.

Ford halted work at its Explorer SUV plant in Chicago a number of times this week after a few workers tested positive for Covid-19. One work stoppage stemmed from a brief closure of a nearby Lear Corp. factory after a worker there tested positive for the virus, which cut off the supply of seats to the Ford factory.

Ford's pickup-truck plant in Dearborn, Mich., near the company's headquarters, closed for several hours Wednesday following a confirmed Covid-19 case.

GM ended April with about 150,000 trucks on its dealerships' lots, 45% less than a year earlier, according to Wards Intelligence. Ford's inventory of F Series pickup trucks was down 15% from a year earlier. Fiat Chrysler's inventory of Ram pickup trucks was 32% lower.

"As we begin to replenish the pipeline, trucks and full-size SUVs will remain a very high priority," GM Chief Executive Mary Barra said earlier this month.

The trucks, along with GM's line of mechanically similar full-size SUVs, such as the Cadillac Escalade, generate about $65 billion in annual revenue, GM told investors in February.

Credit Suisse estimates GM's truck business racked up $10.7 billion in pretax profit in 2019, or about 90% of the company's total, excluding the impact of the strike.

Write to Mike Colias at Mike.Colias@wsj.com and Ben Foldy at Ben.Foldy@wsj.com

 

(END) Dow Jones Newswires

May 23, 2020 02:47 ET (06:47 GMT)

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