GM to slash jobs and production, cancel some car models




  • In Business/Economy
  • 2018-11-26 16:06:37Z
  • By By Joseph White and David Shepardson

By Joseph White and David Shepardson

DETROIT/WASHINGTON (Reuters) - General Motors Co said on Monday it will cut production of slow-selling models and slash its North American workforce in the face of a stagnant market for traditional gas-powered sedans, shifting more investment to electric and autonomous vehicles.

The announcement is the biggest restructuring in North America for the U.S. No. 1 carmaker since its bankruptcy a decade ago.

GM said it will take pre-tax charges of $3 billion to $3.8 billion to pay for the cutbacks, but expects the actions to improve annual free cash flow by $6 billion by the end of 2020.

GM plans to halt production next year at three assembly plants - Lordstown, Ohio, Hamtramck, Michigan, and Oshawa, Ontario. The company also plans to stop building several models now assembled at those plants, including the Chevrolet Cruze, the Cadillac CT6 and the Buick LaCrosse, the sources said.

Plants in Baltimore, Maryland, and Warren, Michigan that assemble powertrain components have no products assigned to them after 2019 and thus are at risk of closure, the company said. It will also close two factories outside North America, but did not identify those plants.

Its North American salaried workforce, including engineers and executives, will be by 15 per cent, or about 8,000 jobs. The company said it will cut executive ranks by 25 per cent to "streamline decision making."

Its shares were last up 6.2 percent at $38.16.

Even as GM is moving to layoff salaried staff, the company is hiring. At GM's Detroit headquarters Monday, there were signs directing people to a "New Hire Orientation" meeting.

GM Chief Executive Officer Mary Barra told reporters on Monday the company can reduce annual capital spending by $1.5 billion and increase investment in electric and autonomous vehicles and connected vehicle technology because it has largely completed investing in new generations of trucks and sport utility vehicles. Some 75 percent of its global sales will come from just five vehicle architectures by early in the 2020s.

It plans to reduce annual capital spending to $7 billion by 2020 from an average of $8.5 billion a year during the 2017-2019 period.

Cost pressures on GM and other automakers and suppliers have increased as demand waned for traditional sedans. The company has said tariffs on imported steel, imposed earlier this year by the Trump administration, have cost it $1 billion.

Barra did not link the cuts announced Monday to tariff pressures, but said trade costs are among the "headwinds" GM has to face as it deals with broader technology change and market shifts.

With U.S. car sales lagging, several car plants have fallen to just one shift, including its Hamtramck and Lordstown, assembly plant.

A rule of thumb for the automotive industry is that if a plant is running below 80 percent of production capacity, it is losing money. GM has several plants running well below that. Consultancy LMC estimates that Lordstown will operate at just 31 percent of production capacity in 2018.

Rivals Ford Motor Co and Fiat Chrysler Automobiles NV have both curtailed U.S. car production. Ford said in April it planned to stop building nearly all cars in North America.


SLUMPING U.S. SEDAN SALES

The industrywide slowdown in passenger car sales started to pick up steam in 2017.

The shift by U.S. consumer preferences have been away from passenger cars to larger, more comfortable SUVs and pickup trucks has been swift and severe, leaving automakers scrambling to readjust.

As recently as 2012, passenger cars made up more than 50 percent of all U.S. new vehicle sales. Through the first nine months of 2018, that had fallen to a little over 31 percent.

While industry-wide passenger car sales were down 13.2 percent through the first nine months of the year, pickup truck and SUV sales rose 8.3 percent. As well as being roomier, the fuel economy on SUVs and crossovers has improved significantly.

Sales of Cruze, built at Lordstown, fell 27 percent through September 2018. Impala, which is built at Oshawa and Hamtramck, was down 13 percent. Buick LaCrosse and Cadillac CT6, which are built at Hamtramck, were down 14 percent and 11 percent, respectively.


(Reporting by David Shepardson, Paul Lienert; Additional reporting by Nick Carey; Writing by Nick Zieminski; Editing by Susan Thomas and Jeffrey Benkoe)

COMMENTS

More Related News

Ground-breaking electric Chevrolet Volt runs out of juice
Ground-breaking electric Chevrolet Volt runs out of juice

DETROIT (AP) - As their company was swirling around the financial drain in the early 2000s, General Motors executives came up with an idea to counter its gas-guzzling image and point the way to transportation of the future: An electric car with a gas-engine backup that could travel anywhere.

GM extends production at Detroit factory until early 2020
GM extends production at Detroit factory until early 2020
  • Tech
  • 2019-02-22 17:39:36Z

The No.1 U.S. automaker is revamping its operations, which include plant closures and thousands of job cuts, as it looks to boost profitability in the wake of declining U.S. auto sales. The Hamtramck plant will continue to produce the Chevrolet Impala and Cadillac CT6 sedans until early next year, the

Canadian auto union faces Catch-22 in General Motors fight
Canadian auto union faces Catch-22 in General Motors fight

Jerry Dias, the leader of Canada's auto union, is unsparing in his rhetorical attacks on General Motors Co's decision to close its Oshawa, Ontario, assembly plant and lay off thousands of union workers by year-end. Dias promised "drastic measures" to compel GM to extend production of sedans and pickups, including the Silverado, to Sept. 21, 2020, when the current labor contract expires. For more than a century, GM's complex in Oshawa, a city east of Toronto, has been an economic engine for Ontario and Canada, anchored by thousands of highly paid manufacturing jobs.

Leave a Comment

Your email address will not be published. Required fields are marked with *

Cancel reply

Comments

Top News: Economy

facebook
Hit "Like"
Don't miss any important news
Thanks, you don't need to show me this anymore.