General Motors is cutting production of its Chevrolet Sonic and Buick Verano small cars amid higher-than-normal inventories, a sign that low gasoline prices could be weakening the sales outlook for small cars.
GM's Orion Assembly plant in suburban Detroit will be idled the weeks of Feb. 16 and April 6 to adjust supply to market demand, according to two people with knowledge of the plant's production schedule. Workers were notified of the planned downtime this morning, one of the sources said.
A GM spokesman said the company does not discuss its production plans publicly, saying only that GM will "build to market demand."
The production cut comes as Sonic U.S. inventories are at their highest level in a year. On Jan. 1, there were 26,600 Sonics on dealership lots or en route to stores, a 127-day supply. Verano U.S. inventory on Jan. 1 was 9,800, an 84-day supply.
Kelley Blue Book analyst Karl Brauer says that small-car sales had been slowing even before the sharp drop in fuel prices as more consumers opt for small SUVs. “The falling price of gas is accelerating that shift,” he said.
Still, Sonic sales fared well in 2014, despite the sharp drop in gasoline prices in the second half of the year. Sales of the subcompact, sold in both sedan and hatchback models, rose 9 percent, to 93,518, vs. an 8 percent increase for subcompact cars overall. Verano sales slipped 4 percent, to 43,743.
About 1,800 employees work at the 4.3 million-square-foot Orion plant, which was idled around the time of GM's bankruptcy in 2009 but re-opened in 2011 after a $500 million investment.
GM also said in November that it would begin laying off about 160 workers at Orion this month in another move to trim production. A source said a slowdown in the assembly line rate would reduce overall production at the plant by about 16 percent, from 45 cars per hour to about 38.
The plant, much of it unused, is a likely candidate to get additional work in coming years as GM expands its vehicle lineup.
