Bad News At THe Plant

7 01 2008

About 150 jobs in jeopardy as GM drops V-8 engine plans
Decision scraps plans for $300 million investment at River Road plant
By Fred O. Williams NEWS BUSINESS REPORTER
Updated: 01/04/08 11:46 AM

General Motors has scratched plans to build a new V-8 engine in the Town of Tonawanda, one of two new engine lines that the plant won last year as insurance for its future.

The decision undercuts about 150 production jobs at the Powertrain plant on River Road and cancels a planned investment of $300 million.

Rising gasoline prices and higher U.S. fuel economy standards argued against building a new eight-cylinder motor, the company said.

“This isn’t the way the market is being driven,” plant spokeswoman Mary Ann Brown said.

But critics said that GM continues to sell older, less-efficient V-8s in its luxury cars.

GM had announced the new engine last January, with plans to begin offering it as an option for luxury vehicles in 2010. The planned size of the double overhead-cam engine wasn’t disclosed.

Plans to produce a new diesel engine for pickup trucks, the second engine announced last year, remain on track.

About 130 workers currently laid off from the plant had hopes of being recalled to build the new engine, Brown said. The cancellation puts at least some of the jobs in jeopardy. However, voluntary departures of other workers could create openings for those on layoff.

GM’s factory complex in the Town of Tonawanda has about 1,800 jobs and makes an array of engines, from the four-cylinder in Chevy’s Cobalt to the eight-liter V-8 that powers the Chevy Kodiak/GMC TopKick commercial truck.

When it was announced a year ago, the luxury V-8 was hailed as vote of confidence in the factory and a source of future work.

Losing the product is a blow, but not necessarily one that will leave permanent damage, a union official said.

“They’re working very hard to bring some new business in,” United Auto Workers Assistant Regional Director Kevin Donovan said. The loss of work doesn’t reflect on the plant’s viability, he said.

A severance incentive is expected to be announced later this month to spur early retirements from the plant. Laid-off workers would have the first claim on openings left by those departures.

The cancellation also erases a planned $3.6 million state grant to support GM’s investment, a spokeswoman for Empire State Development Corp. said. Another $1 million to support the diesel project remains on tap, the agency said. The funds aren’t paid until work is complete.

U.S. fuel economy standards that take effect in 2020 require automakers to achieve an average fuel economy of 35 mpg, up 40 percent from current levels. The new Corporate Average Fuel Economy standard was enacted in December.

“We see a downsizing of engines in general with fewer cylinders, as we get closer to 2020,” said Phil Gott, director of automotive consulting at industry analyst Global Insight.

But Rep. Louise M. Slaughter, D-Fairport, blasted GM’s decision to drop the more-efficient V-8 engine as short-sighted.

“Instead of embracing innovation and developing a fuel-efficient engine, they continue to build giant gas guzzlers — all at a time that we see oil topping $100 a barrel,” Slaughter said in a statement.

More than half of Cadillac sedans traditionally sell with eight-cylinder engines, analysts said. But Cadillac says that buyers are moving to a new, 3.6-liter V-6 whose 304 horsepower is comparable to the older, 4.6 liter V-8.

Whether killing the planned replacement V-8 will save gas depends on whether luxury car buyers will continue to shift to smaller engines. With the newer V-6 made in Flint, Mich., “you’re saving about 150 pounds in weight and losing only a marginal increase in torque from the V-8,” Gott said.

However, Gott added, luxury car buyers usually aren’t motivated by efficiency and fuel economy.

“We’re not so sure the consumer will see it the same way,” he said. With an expected production of about 200 units a day, the new V-8 would have been a relatively small product for Tonawanda, Brown said.

More in tune with today’s automotive market is the planned 4.5 liter, eight-cylinder diesel for pickup trucks.

The diesel will be produced in Plant 5 of GM’s Tonawanda complex. Production of five-cylinder motors was shifted to Flint to make space for the diesel line.

To comment on this story, go to our Strictly Business blog.

fwilliams@buffnews.com

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