India, China, Russia will add to GM's production

DETROIT: General Motors Co plans to get 80 per cent of its additional production through 2015 from low-cost, developing countries such as China, India and Russia.

It makes sense for "incremental future vehicle production" to come low-cost countries with the most growth, said Diana Tremblay, GM's global manufacturing chief, on Tuesday.

Tremblay made her comments as part of a "GM Global Business Conference" mainly for financial analysts held in Detroit that was webcast.

She said GM "is not ignoring" developed, higher-cost countries such as the United States, Western Europe and Australia for production.

For instance, Tremblay said, GM earlier this year announced that it would spend $5.5 billion over two years to upgrade production plants in North America.

She said GM has, without adding another plant, the ability to meet a US auto market of 16 million in annual sales, a level not seen since 2007.

"We sized ourselves in order to meet demand if the market goes back, when the market goes back, to 16 million" in annual US auto sales, Tremblay said.

GM Chief Executive Dan Akerson on Tuesday reiterated the company's expectation that US auto sales will finish 2011 with nearly 13 million vehicles.

Last year, GM's capacity utilization of its US plants was 90 percent, she said, and is expected to reach 98 to 99 percent by the end of this year.

Tremblay said it can run at 133 percent of production capacity in North America if a third shift were added to each of its plants. Doing so would allow GM to meet market demand for 16 million in annual US auto sales, she added.

Using overtime for factory workers can bring GM's capacity utilization to 150 percent, she said.

An analyst asked Tremblay if running all of GM's plants in North America around the clock with three shifts would crunch profit margins due to higher maintenance costs.

Tremblay said many GM plants around the world have run on three shifts and there is no reason such plant schedules would not work in North America.

"In many operations, running them continuously helps in terms of operational efficiency," said Tremblay.

"Just the fact that you keep cycling the equipment is sometimes very helpful for maintenance," said Tremblay.

Since 2005, GM has taken out 1.5 million in annual production capacity in North America, largely by closing plants, and reduced US labor costs by $11 billion since 2005, she said.