Cutting capacity when demand slows

June 24, 2008: GM Offers Incentives to Clear Backlog

It is no surprise that GM has too many large vehicles that are far less popular than they use to be given the current situation with fuel prices. Unfortunately, capacity is not very flexible in the auto industry. Nevertheless, they need to find ways to cut back on production.  This article suggests GM will  “…reduce shifts, reduce assembly line speeds and temporarily idle seven factories.”  Reducing assembly line speed will reduce capacity in smaller increments than reducing an entire shift, but it is an odd option because it introduces a change to the production process.  An alternative would be to operate at the same speed but only for a portion of a shift.



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