GM pushing ahead rapidly with Texas plant expansion

ARLINGTON, Texas – On most days now, three shifts of workers toil from dawn to dawn outside the General Motors Assembly Plant in this Dallas-area city — just like those inside.

As part of a massive $1.4 billion expansion project, construction crews dig and haul dirt on the west side of the plant around the clock, preparing the site for a new body shop.

The long hours are just beginning in what is likely to be a frenetic three-year project.

"We could have saved money by taking a few months of downtime for some of the work," plant manager Juan Carlos "J.C." Jiminez acknowledged in a recent interview. "The reason for the massive investment is we don't want to impact our customers with a shutdown."

As a result, the expansion and assembly work at the plant will continue simultaneously.

The GM Arlington plant, which employs about 4,000 people on three daily shifts, builds the Chevrolet Tahoe and Suburban, GMC Yukon and Yukon XL and all models of the red-hot Cadillac Escalade.

Strong sales of those trucks have allowed GM to dominate the full-size SUV market, commanding about 75 percent of the highly profitable segment.

"For the last five or six months, we are producing every unit we can," Jiminez said. "And we see demand for SUVs staying strong."

With gas prices hovering around $2 a gallon, pickups, SUVs and crossovers now account for more than 40 percent of new vehicle sales in the U.S.

In October, the 61-year-old plant set an all-time production record, building 31,982 SUVs. It expected total output to exceed 300,000 vehicles in 2015, Jiminez said. Both volumes are "significantly higher" than GM had predicted two years ago, he said.

The SUVs built in Arlington are among GM's most profitable vehicles, probably generating profits of about $10,000 each, according to some analysts.

In addition, the Escalade remains one of struggling Cadillac's most prominent vehicles — its sales were up 20 percent in 2015.

Hundreds of robots at the body shop currently weld SUV shells together and send them by conveyor to the paint shop, where they are sprayed with color and prepared to be sent down the assembly line.

Paint and body shops are any plant's "pinch points" — meaning the work starts there and the shops' production generally determines how many vehicles can be assembled daily.

Though the entire project will add 1 million square feet of new space to the plant, a 33 percent increase, the paint and body shops won't be dramatically larger than the current facilities, Jiminez said.

Both, however, will be fitted with much better equipment.

"We are really upgrading the facility to catch up with the future — and it will be done without impacting the production process," he said.

"These are highly profitable vehicles, and my guess is GM is already seriously considering more fuel-efficient alternative power plants and other ways to keep them competitive," said Jesse Toprak, president of Toprak Consulting Group of Encino, Calif.

The demand for Arlington's well-regarded SUVs comes from the Middle East, Mexico and South America as well as the U.S.

GM won't say exactly how much of Arlington's monthly production gets shipped outside the U.S., but sales numbers suggest it often approaches 20 percent — sometimes cutting into U.S. dealer orders.

It's a good problem to have, Toprak said.

"Overall, I think these [high] sales will be stable for at least the next three or four years," he said. "And we continue to see an upside potential. The only threat to SUV sales might be increasing gas prices, which seem unlikely."

"It's one place where they have absolutely no competition, so they should stand behind it," he said.