General Motors Co. (Detroit) didn’t wait until the end of the holidays to put down the hammer.
The largest U.S.-based automaker said Monday it’s looking to close three auto-assembly plants, largely cutting back its presence in cars to concentrate on pickups and SUVs. The company also said intends to close two plants outside North America by the end of 2019.
Besides the plants affected, GM also is cutting salaried jobs. No specific figure was given. But GM is looking to pare its “salaried and salaried contract staff” by 15%. That includes having 25% fewer executives ” to streamline decision making.”
All told, GM says the moves will free up $6 billion in cash annually. The company says it will record costs of $3 billion to $3.8 billion.
The headline on the release was cheerily phrased, “General Motors Accelerates Transformation.”
The Chopping Block
The three car-assembly that are targeted are Detroit-Hamtramck, Lordstown, OH, and Oshawa, ON. Also on the chopping block are two engine plants in Maryland and Michigan.
Officially it’s not a closing announcement. That will require negotiations with the United Auto Workers union in the United States and Unifor in Canada.
However, GM said those factories will be “unallocated” by the end of 2019, meaning they have no vehicles assigned to them to assemble. The UAW later issued a statement the move “will not go unchallenged” by the union.
Among the models made at the plants are the Chevrolet Volt plug-in hybrid, Chevrolet Impala and Chevrolet Cruze.
A decade ago, GM said it was investing in fuel efficient cars after gasoline prices skyrocketed. The automaker, seeking a U.S. bailout, cited the Cruze as an example of the future technology it was developing.
Before you know it, the future becomes the past. Fuel prices went back down. Popularity of trucks and SUVs increased. Those models are more profitable than cars to begin with. Car popularity generally is plunging. Ford Motor Co. (Dearborn, MI) mostly is getting out of cars to concentrate on trucks, SUVs and crossovers.
What’s more, the three assembly factories have a problematical history with GM.
The company has tried to close Oshawa before but the factory has survived. GM has had awful labor relations at Lordstown for decades. Detroit-Hamtramck was built using eminent domain, spurring court fights and protests. Assuming they close, GM will close some troubled chapters.
What’s spurring all this is the greatest automotive uncertainty in more than a century.
An Uncertain Future
The industry is developing self-driving cars and trucks. Automakers also are looking to expand their “electrified” vehicles. For GM, the Volt was the vanguard of that trend. Yesterday’s vanguard is today’s casualty.
In any case, all those self-driving and electrified vehicles are going to require investment. Lots of it. Essentially, GM is looking to maximize profits from pickups and SUVs to help fund investment in the future.
“The actions we are taking today continue our transformation to be highly agile, resilient and profitable, while giving us the flexibility to invest in the future,” GM CEO Mary Barra said in the company statement. “We recognize the need to stay in front of changing market conditions and customer preferences to position our company for long-term success.”
Of course, GM thought it had the future figured out a decade ago. Today’s announcement shows looking into the future is not easy.