General Motors Corp. yesterday announced that it would lay off 1,600 workers in Flint and Pontiac, Mich., largely because of decreased demand for the V-8 engine, rear-wheel-drive cars produced there.
The announcement came amid increased speculation that GM's current overall production schedule is not supported by actual consumer demand.
"For the first 10 months of this year, GM has held 56.1 percent of the market for U.S.-built cars. But they've been building enough to fill 60 percent to 63 percent of that market," said one Detroit auto analyst, who requested anonymity.
Other analysts said the layoffs reflect GM's own production plans and are not indicative of long-term weaknesses in the domestic auto market.
GM officials traditionally have declined comment on their production plans, and they continued to do so yesterday.
But GM spokesmen in Detroit yesterday confirmed that the decision to shut a Fisher Body assembly plant in Flint and another assembly plant in Pontiac was based on slow sales of the Buick Regal Coupe produced at those two facilities.
The layoffs are expected to begin Dec. 16 and last for six months, or until sales have soaked up inventories of those models, the spokesmen said.
GM, Ford Motor Co., Chrysler Corp. and American Motors Corp. all had below-8 percent financing rate campaigns that began in mid-August and ended in early October.
GM started the programs, ostensibly to clear out a huge backlog of cars and trucks that piled up during a lengthy strike last summer by Teamster car haulers.
But Ford officials and some industry analysts said privately that GM's real intent was to shore up its U.S. market share.
GM succeeded in clearing out its leftover 1985 models, but failed to significantly improve its share of the U.S. market, according to industry analysts. The reason was that "Ford and Chrysler were forced to follow GM's sales campaign" to hold onto their market shares, a Ford spokesman said.
At the end of October, GM had a 74-day supply of cars; Ford had enough to meet demand for 56 days and Chrysler had a 53-day supply. The troubled AMC had enough for 115 days. A 50-to-60-day supply of cars is considered normal in the domestic auto industry.
GM's decision to keep an aggressive production schedule, despite its bulging inventories, has troubled and puzzled the giant auto maker's competitors. There are three possible motives for GM's actions, the rivals believe. They are:
*GM's economic forecasters see more strength in the economy next year than do most government and private economic analysts.
*GM deliberately is building up a large inventory so that it can drop those cars on the market at cut-rate prices early next year -- in time to adversely affect sales of Ford's brand new Taurus and Sable car lines, the most substantially new models to be offered by a domestic manufacturer in 1986.
*GM is just testing the market. And if the market cannot digest all of the cars the auto maker is producing, GM will curtail production as needed.
If GM goes the build-and-dump route, its competitors can be expected to follow in an effort to improve their market shares, analysts said.