The General Motors Co. factory that was once the sick man of Canadian auto plants has become one of the company's star performers – so much so that GM plans to boost production at the plant for the fifth time in recent years.

Cami Automotive Inc., already running almost flat out at three shifts a day and a Saturday overtime shift, will speed up its assembly line to squeeze out 50 more hot- selling Chevrolet Equinox and GMC Terrain models a day, on top of the approximately 1,100 assembled now, industry sources familiar with GM's plans said.

GM spokeswoman Faye Roberts would not comment directly on plans to increase line speed, but noted that GM is "optimizing production processes to meet market demand" and as a result will hire more employees. Cami has about 2,700 hourly and salaried workers.

The way GM has geared up production at the plant in Ingersoll, Ont., illustrates one of the key operating principles of the Detroit auto maker since the company emerged from Chapter 11 bankruptcy protection in 2009: It now insists that existing plants are at maximum production before building new factories.

In Cami's case, it starts with the redesigned version of the Equinox, a mid-sized crossover utility vehicle. It's now the fourth-best selling vehicle in the GM lineup. As of the end of August, its sales were up 48 per cent, second only to the Terrain's 61-per-cent surge among GM vehicles.

"I can't hardly keep them in stock," Jonathan Wiest, sales manager at Davis-Moore Chevrolet in Wichita, Kan., said of the Equinox. It is one of the top three performers at his dealership, alongside the larger Traverse crossover and the Silverado pickup. About 50 per cent of sales came from customers trading in vehicles from other auto makers, Mr. Wiest said.

Its share of the U.S. crossover market has jumped to 14.6 per cent from 4.7 per cent for the previous version of the vehicle, GM officials have said. Average transaction prices have risen $3,800 (U.S.).

As of Aug, 31, Mr. Wiest and other U.S. dealers had a 33-day supply of Equinox models, about half the 60-day supply that is standard in the industry.

Production of the Equinox and the Terrain soared 48 per cent in the first eight months, up to 225,753 from 152,007 in the same period in 2010. That figure includes unfinished and unpainted Equinox bodies that are being shipped east along Highway 401 to another GM plant in Oshawa, Ont., for final assembly.

Shipping those bodies to Oshawa to help fill an underutilized plant is another example of how GM has changed.

"When we planned those vehicles for the North American market, we planned for about 180,000 units," Diana Tremblay, GM's global chief manufacturing officer said in a presentation in August. "That's the capacity that we put in place."

But the vehicles took off, so GM added a third shift of workers in Ingersoll, which boosted production by about 60,000 annually. Increasing productivity and eliminating bottlenecks added another 50,000 and overtime increased production by another 25,000.

Using Oshawa led to 60,000 more vehicles, Ms. Tremblay said.

All of that is likely to lead to the highest output since Cami opened in 1989 as a joint venture between GM and Suzuki Motor Corp. of Japan, which sold its stake in the plant to GM during the crisis.

Cami produced 257,403 vehicles in 2010. Its low point was 1998, when just 45,063 vehicles rolled off the line.

Question:
The article states that GM “… now insists that existing plants are at maximum production before building new factories.” Does this make economic sense? Explain carefully when it makes sense to build a new plant or to expand an existing one, rather than to operate an existing plant over capacity. Use your graph to explain.

The General Motors Co. factory that was once the sick man of Canadi...