The Buffalo News, April 26, 2010, Monday

The Buffalo News

April 26, 2010, Monday

The Buffalo News

GM plant to get new line of V-8 engines
400 million investment brightens facility's future

By Matt Glynn

General Motors will announce today it is investing $400 million in its Town of Tonawanda plant to produce a new V-8 engine, according to a source familiar with the project.

The number of new jobs tied to the investment could not be confirmed. As of last week, the plant had 664 hourly workers and an additional 219 on layoff.

GM said it will hold a media event this morning to announce "some positive economic news" for the plant, but a GM spokeswoman could not be reached to comment further.

The source familiar with the project said the plant was selected to produce a "Generation V" V-8 engine. Production of a V-6 engine could be added to the lineup in the future, the source said.

This is the second major investment the plant has secured this year. In February, GM announced a $425 million investment to produce the automaker's four-cylinder, next-generation Ecotec engine. That production is expected to begin in 2012 and to create 470 jobs.

The Town of Tonawanda plant was known to be a candidate for the latest project, and plant management, local United Auto Workers leaders and other officials were pushing to win it. The Erie County Industrial Development Agency has approved tax breaks aimed not only at the project announced in February, but also at the new V-8 line.

With the back-to-back investments, the plant's outlook has brightened dramatically from a year ago, when two of its engine lines were phased out and its work force was sharply cut through buyouts and layoffs.

GM went through a Chapter 11 bankruptcy last year and needed federal loans to survive.

Art Wheaton, an automotive industry expert, said good labor-management relations have kept the plant competitive for new investments.

"[Plant manager] Steve Finch has been willing to work with the union," said Wheaton, director of Western New York labor and environmental programs at Cornell University's School of Industrial and Labor Relations in Buffalo. "The UAW has been receptive to trying new things and working together."

"I think they've been more aggressive in trying to actively pursue [new] engines," he said.

Shifts in the auto industry this year have also helped GM, Wheaton said. Toyota's troubles have helped stabilize the domestic automakers' production and sales, he said. "There's no longer the aura of saying Toyota is so great and everyone else is so bad."

American consumers, likewise, are showing more confidence in GM's long-term prospects, he said. "Since their sales stabilized, there's no more talk about GM going out of business."

The new V-8 engine expected to be awarded to GM Tonawanda is much different from the L-18 "big block" phased out last year, said Kevin Riddell, an automotive forecaster with J.D. Power and Associates.

"This will be a bit more efficient, comparable power, probably a little more," he said. The new engine will be used in pickup trucks and performance vehicles, he said.

Andrew Rudnick, president of the Buffalo Niagara Partnership, said the investment is good news for the plant and its local suppliers, as well as a selling point for the region.

Rudnick also said management-labor relations at the plant helped pave the way for the new investment and that cooperation has endured changes in the plant and union leadership. Employers who might bypass the Buffalo Niagara region for investments because of its high rate of unionization should take note, Rudnick said.

"What this shows is, maybe you need to look a little bit deeper," he said.

Incentives from such sources as the county Industrial Development Agency have helped the plant modernize and compete for new work, Rudnick said. "I think we are fortunate, but it's not by luck."

If the investment is the one the development agency was seeking with its incentives, it will provide a healthy boost to the economy, said Al Culliton, the agency's chief operating officer.

"These jobs are spinoff-rich jobs," he said, noting economic analysis showing such jobs have among the highest "multiplier effect."

New investments are critical to the local plant's viability, since it is located outside of GM's main assembly stream in the Midwest, Culliton said.

Sen. Charles E. Schumer said he couldn't confirm details of the investment but said the productivity of the Tonawanda plant's work force has impressed GM. "I think it's a hopeful sign for American manufacturing."

"The hard work of the workers is paying dividends," said Schumer, who had written to Edward Whitacre, GM's chief executive officer, urging GM to choose Tonawanda for the project.

Assemblyman Robin Schimminger, D-Kenmore, said securing the new engine helps solidify the plant's future. "Making capital investments in a plant more deeply roots such a facility into its location," he said.

State Sen. Michael H. Ranzenhofer, R-Amherst, said the investment shows that GM has "turned the corner."

"I think the direction is very positive, not only for the company but also the community," he said.

News Staff Reporter Stephen T. Watson contributed to this report.

mglynn@buffnews.com