General Motors stated on Monday it will slash production of slow-selling models and cut its North American workforce in the face of a decreasing market for traditional gas-powered sedans, moving more investment to electric and autonomous vehicles.
The announcement is the biggest North America restructuring for the U.S. No. 1 automaker since its bankruptcy a decade ago. Its shares increased 7.6 percent to $38.66.
GM prepares to halt production next year at three assembly plants: Lordstown, Ohio; Hamtramck, Michigan; and Oshawa, Ontario. It will further stop building several models now assembled at those plants, consisting of the Chevrolet Cruze, the Cadillac CT6 and the Buick LaCrosse. The Cruze compact car will be no longer continued in the U.S. market from next year.
Plants located in Baltimore, Maryland, and Warren, Michigan, assembling powertrain components are going to have no products assigned to them after next year and are at risk of closure, GM stated. It will also shut down two unidentified factories outside North America.
“We are right-sizing capacity for the realities of the marketplace,” CEO Mary Barra stated, adding that GM will twice resources dedicated to electric and self-driving vehicles during the next two years.
Cost pressures on GM and other automakers and providers have boosted as demand has waned for traditional sedans. The company has stated tariffs on imported steel, imposed previously this year by the Trump administration, have cost it $1 billion.
Barra did not connect Monday’s cuts to tariff pressures, but stated trade costs are one of the “headwinds” the automaker faces as it deals with broader technology change and market shifts.
The biggest U.S. autoworker union pledged to fight GM’s strategies. “General Motors’ decision today… will not go unchallenged by the UAW,” stated Terry Dittes, the union’s vice president in charge of negotiations with the automaker.
Canadian Prime Minister Justin Trudeau stated he talked with Barra and expressed “deep disappointment”.
GM stated it will take pre-tax charges of $3 billion to $3.8 billion to pay for the cutbacks, but anticipates the actions to enhance annual free cash flow by $6 billion by the end of 2020.
