DETROIT and SANTA BARBARA, Calif. -

Reports have surfaced indicating that General Motors has temporarily idled its Chevrolet Malibu plant in Fairfax, Kan.
 
And this is good news for the automaker when it comes to residual values, says ALG’s Eric Lyman. It won’t just be the Malibu’s values that benefit, either, said the firm’s vice president of partner development and editorial.

“GM is making the value-preserving decision to right size their production with consumer demand, avoiding heavy discounts,” said Lyman.

“This will positively impact vehicle values not only for the Malibu, but also help mitigate any residual risk on the Cruze and the forthcoming Impala,” he added, referring to other Chevy models.

As to why this idling would help mitigate risk, Lyman said “the risk to Cruze and the forthcoming Impala (and other Chevrolet products for that matter) is twofold,” and then broke the reasons down, as follows.

First, Lyman said, “Heavy incentives erode brand value. As incentives increase, the emphasis to consumers is more about the “deal” than the product. This can compromise brand loyalty and brand image.”

Secondly, he noted: “Heavy incentives on the Malibu shrink the pricing walk down to the Cruze and increase the pricing walk up to the Impala. Thus, with heavy incentive on the Malibu we would see more consumers considering stepping up to the Malibu (if pricing on the Cruze remains unchanged) and could impact sales/demand for the Cruze. Likewise, we would see consumers less willing to step up to the Impala.”

In response for confirmation of the idling and more details, a Chevy spokesperson told Auto Remarketing: “We can't comment on production schedules. Regarding Malibu, it's one of GM and Chevrolet's best-selling nameplates. We are balancing supply with demand.”

An entry on ALG's blog explains the situation in more detail and points out GM is trying to trim its supply of the 2013 Malibu, which had reached a 106-day level as of Dec. 1.

This level of supply for the model was “more than anticipated and relatively high in the very competitive midsize segment,” according to the ALG blog, which said the automaker is taking the same action for its Cruze production in Lordstown, Ohio.

A spokesperson for the plant confirmed to Auto Remarketing that the Lordstown facility  “is idled the week of Dec. 17-21 to balance production with demand.”

To see the complete entry, visit ALG’s blog here.