Date
12 December 2018
General Motors CEO Mary Barra said the measures are necessary to keep the company strong as it plows money into new technology and new businesses such as robo-taxi services. Photo: Reuters
General Motors CEO Mary Barra said the measures are necessary to keep the company strong as it plows money into new technology and new businesses such as robo-taxi services. Photo: Reuters

GM to slash jobs and production, drawing Trump’s ire

General Motors Co. said it will cut production of slow-selling models and slash its North American workforce because of a declining market for traditional gas-powered sedans, shifting more investment to electric and autonomous vehicles, Reuters reports.

GM’s actions add up to the biggest restructuring for the US No. 1 carmaker since its bankruptcy a decade ago, and mark a turning point for the North American auto industry. US automakers have enjoyed nearly a decade of prosperity since the 2008-2009 financial crisis and the government bailouts of GM and the former Chrysler Corp.

GM’s announcement immediately drew criticism from US President Donald Trump, highlighting the political risks facing GM.

He demanded the automaker find a new vehicle to build in Ohio and added that he had told GM chief executive Mary Barra he was unhappy with her decision to cut production at an Ohio factory. Ohio will be a key state in the 2020 presidential campaign.

“I have no doubt that in the not too distant future, they’ll put something else. They better put something else in,” said Trump, who has pushed for more manufacturing jobs throughout his almost two years in office.

GM did not immediately comment on Trump’s remarks, but the company noted it has other facilities in Ohio including a transmission plant in Toledo and metal center in Parma.

GM and its rivals are facing rising bills for technological transformation, increased risks from US trade policy and investors reluctant to fund their traditional product strategies.

Barra on Monday portrayed the decision to put five North American factories on notice for potential closure and cut nearly 15,000 jobs as necessary to keep the company strong as it plows money into new technology and new businesses such as robo-taxi services.

“This industry is changing very rapidly,” Barra said during a press briefing. “These are things we are doing to strengthen our core business.”

GM shares rose as much as 7.8 percent following the announcement, and were nearly 6 percent higher at US$37.97 in mid-afternoon trading. Shares of Detroit rivals Ford Motor Co. and Fiat Chrysler Automobiles NV also rose, outpacing the broader market.

GM plans to halt production next year at three assembly plants: the Lordstown small-car factory near Youngstown, Ohio; the Detroit-Hamtramck complex in Detroit; and the Oshawa, Ontario, assembly complex near Toronto. It will also stop building several models now assembled at those plants, including the Chevrolet Cruze, the Chevrolet Volt hybrid, the Cadillac CT6 and the Buick LaCrosse. The Cruze compact car will be discontinued in the US market in 2019, although GM may continue building it in Mexico for other markets, Barra said.

Plants in Baltimore, Maryland, and the suburban Detroit community of Warren, Michigan, both of which make powertrain components, have no products assigned to them after 2019 and are at risk of closure, GM said. The company said it will also close two unidentified factories outside North America.

‘Right-sizing’

“We are right-sizing capacity for the realities of the marketplace,” Barra said.

GM is also moving to cut capital spending overall, even as it says it will double the resources dedicated to electric and self-driving vehicles over the next two years.

GM last year promised to launch a fleet of 20 new battery electric vehicles in North America by 2023, along with at least 10 new electric vehicles in China by 2020. The expenditures to bring those vehicles to production will start to hit with new batteries and body architectures designed to generate profits.

The company is also ramping up hiring at its GM Cruise autonomous vehicle unit, pushing to overcome technical challenges and make good on a plan to launch a robo-taxi service next year.

Even with the higher spending on electric and autonomous vehicles, GM plans to reduce overall annual capital spending to US$7 billion by 2020 from an average of US$8.5 billion a year during the 2017-2019 period. The automaker has come under pressure from investors to return more cash in the form of share buybacks and dividends.

Cost pressures on GM and other automakers and suppliers have increased as demand has 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 Monday’s cuts to tariff pressures, but said trade costs are among the “headwinds” GM faces as it deals with broader technology change and market shifts.

GM’s actions provoked anger from political figures on both sides of the US-Canada border, and from its main North American unions.

The United Auto Workers, which represents US workers, vowed to fight the cuts. “General Motors’ decision today … will not go unchallenged by the UAW,” said Terry Dittes, the union’s vice president in charge of negotiations with GM.

Canadian Prime Minister Justin Trudeau said he spoke with Barra and expressed “deep disappointment”.

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CG

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