Will Small Be Beautiful for GM?

Will Small Be Beautiful for GM?
"This time, the Orion plant is a symbol of government regulation run amok as Washington keeps GM on life support so that it will produce the cars Washington wants to build.
On June 1, GM Vice President for Global Manufacturing Gary Cowger announced as part of the company's bankruptcy filing that it would close the Orion facility in its drive to become a 'leaner, stronger and more flexible' company. Though still a relatively modern facility making midsize Chevy Malibu and Pontiac G6 sedans, Orion's once 5,000-strong labor force had shriveled to 1,200 as the recession ravaged sales and the company planned to eliminate its Pontiac brand and consolidate Malibu production at a Kansas City facility.
But a few weeks later, the company reversed course. GM now says it will retool Orion to make compact, gas-sipping cars. The change of heart says a lot about how GM's new owners -- the federal government owns 60% of the company and the United Auto Workers (UAW) owns 17% -- are making considerations other than profitability a top priority for the auto maker.
The Obama administration is increasing Corporate Average Fuel Economy (CAFE) mandates to 35.5 mpg for all vehicles in a company's fleet by 2016, up from 27.5 mpg for cars and 23 mpg for light trucks now. Not a single GM vehicle meets the new CAFE standard, so the company is scrambling to make new high-mileage cars.
It was planning to build a new compact car in China (it already works with Daewoo to make the tiny Chevy Aveo in South Korea). Most auto makers have similar arrangements -- profit margins are so low for compacts made in America that not a single auto company makes a compact inside the U.S. Not the Japanese. Not the Koreans. And not even Ford, which plans to make its new Fiesta in Mexico."