General Motors (GM; Detroit) announced yesterday that 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.
GM plans to halt production next year at three assembly plants: Lordstown, OH; Hamtramck, MI; and Oshawa, ON, Canada. 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 Cruze compact car will be discontinued in the U.S. market in 2019, according to a Reuters report.
Plants in Baltimore, MD, and Warren, MI, that assemble powertrain components will have no products assigned to them after 2019, which means those facilities are at risk of closure, the company said. It will also close two factories outside North America, but it did not identify which ones.
With U.S. car sales lagging, several auto plants have fallen to just one shift, including GM’s Hamtramck and Lordstown assembly plants, said Reuters, adding that the rule of thumb for the automotive industry is that if a plant is running below 80% of capacity, it’s losing money. GM has several plants running well below that.
“We are right-sizing capacity for the realities of the marketplace,” said Chief Executive Mary Barra, adding that the automaker is running at about 70% capacity utilization in North America. The cuts were prompted by auto industry changes. Barra said the company will double resources dedicated to electric and self-driving vehicles over the next two years.
The announcement is the biggest restructuring in North America for the number one U.S. carmaker since its bankruptcy a decade ago. Its shares rallied 7.6% to $38.66, Reuters said.
GM’s North America salaried workforce, including engineers and executives, will shrink by 15%, or about 8,000 jobs. The company said it will cut executive ranks by 25% to “streamline decision making.”
Barra said GM 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% of its global sales will come from just five vehicle architectures by the early 2020s.
Reuters noted that while passenger car sales were down 13.2% industry-wide through the first nine months of the year, pickup truck and SUV sales rose 8.3%. As well as being roomier, SUVs and crossovers have significantly improved fuel economy.
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