Small cars prove next big thing

  • 23/06/2008

  • Business Standard (New Delhi)

Bernard Simon Carmakers aim to improve margins with more pricing power on small models. General Motors' assembly plant in Lordstown, Ohio, is a rarity these days. At a time when the carmaker is trimming capacity and chopping jobs across North America, Lordstown is about to hire 1,400 workers for a third shift. The plant owes its good fortune to building the sporty, fuel-efficient Chevrolet Cobalt and Pontiac G5 cars. While demand for big sport-utility vehicles and pick-up trucks has plummeted, Cobalt sales jumped by 18 per cent in the first five months of 2008. The plan to step up production at Lordstown is an example of the scramble by carmakers to realign their North American capacity from slow-selling light trucks to increasingly popular cars and crossover vehicles. But managing such a fundamental shift is a complicated process. "You have to have a supply chain that can move with you," says Mike Wall, a consultant at CSM Worldwide. Honda, known for its close relationship with parts suppliers, is pulling out the stops to meet burgeoning demand for its Civic model, which became the top-selling US vehicle last month. Production of the mid-sized Pilot crossover has been moved to Alabama from a plant in Ontario, which already makes Civics. The Ridgeline pick-up will follow early next year. Honda is also stepping up Civic output at a plant in Ohio at the expense of the boxy Element crossover. A new Civic plant, with an annual capacity of 200,000 vehicles, is due to open in Indiana this autumn. Toyota, which had the misfortune to open a plant in Texas dedicated entirely to its big Tundra pick-up just as sales were starting to dip in late 2006, said it was studying "several options" in the US for its Camry and Corolla sedans, which were the second and third best-selling models last month. "We're trying to maximise the flexibility of our plants," the company said. The three Detroit-based companies