GM Announces Massive Cuts With Plant Closures and Layoffs

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You can bet I will have more comments on this as real details shake out, but I have a few at the end of this article.  You can also watch a news story I did for NBC 5 in DFW.

In a press release this week,  General Motors announced it would be closing five plants and laying off 15 percent of its workforce:

GeneralMotors will accelerate its transformation for the future, building on the comprehensive strategy it laid out in 2015 to strengthen its core business, capitalize on the future of personal mobility and drive significant cost efficiencies.

GM is continuing to take proactive steps to improve overall business performance including the reorganization of its global product development staffs, the realignment of its manufacturing capacity and a reduction of salaried workforce. These actions are expected to increase annual adjusted automotive free cash flow by $6 billion by year-end 2020 on a run-rate basis.

“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,” said GM Chairman and CEO Mary Barra. “We recognize the need to stay in front of changing market conditions and customer preferences to position our company for long-term success.”

You can watch the NBC 5 interview here:

Contributing to the cash savings of approximately $6 billion are cost reductions of $4.5 billion and a lower capital expenditure annual run rate of almost $1.5 billion. The actions include:

  • Transforming product development – GM is evolving its global product development workforce and processes to drive world-class levels of engineering in advanced technologies, and to improve quality and speed to market. Resources allocated to electric and autonomous vehicle programs will double in the next two years. Additional actions include:
    • Increasing high-quality component sharing across the portfolio, especially those not visible and perceptible to customers.
    • Expanding the use of virtual tools to lower development time and costs.
    • Integrating its vehicle and propulsion engineering teams.
    • Compressing its global product development campuses.
  • Optimizing product portfolio – GM has recently invested in newer, highly efficient vehicle architectures, especially in trucks, crossovers and SUVs. GM now intends to prioritize future vehicle investments in its next-generation battery-electric architectures. As the current vehicle portfolio is optimized, it is expected that more than 75 percent of GM’s global sales volume will come from five vehicle architectures by early next decade.
  • Increasing capacity utilization – In the past four years, GM has refocused capital and resources to support the growth of its crossovers, SUVs and trucks, adding shifts and investing $6.6 billion in U.S. plants that have created or maintained 17,600 jobs. With changing customer preferences in the U.S. and in response to market-related volume declines in cars, future products will be allocated to fewer plants next year.
  • Assembly plants that will be unallocated in 2019 include:
    • Oshawa Assembly in Oshawa, Ontario, Canada.
    • Detroit-Hamtramck Assembly in Detroit.
    • Lordstown Assembly in Warren, Ohio.
  • Propulsion plants that will be unallocated in 2019 include:
    • Baltimore Operations in White Marsh, Maryland.
    • Warren Transmission Operations in Warren, Michigan.

In addition to the previously announced closure of the assembly plant in Gunsan, Korea, GM will cease the operations of two additional plants outside North America by the end of 2019.

These manufacturing actions are expected to significantly increase capacity utilization. To further enhance business performance, GM will continue working to improve other manufacturing costs, productivity and the competitiveness of wages and benefits.

  • Staffing transformation – The company is transforming its global workforce to ensure it has the right skill sets for today and the future, while driving efficiencies through the utilization of best-in-class tools. Actions are being taken to reduce salaried and salaried contract staff by 15 percent, which includes 25 percent fewer executives to streamline decision making.

Barra added, “These actions will increase the long-term profit and cash generation potential of the company and improve resilience through the cycle.”

GM expects to fund the restructuring costs through a new credit facility that will further improve the company’s strong liquidity position and enhance its financial flexibility.

GM expects to record pre-tax charges of $3.0 billion to $3.8 billion related to these actions, including up to $1.8 billion of non-cash accelerated asset write-downs and pension charges, and up to $2.0 billion of employee-related and other cash-based expenses. The majority of these charges will be considered special for EBIT-adjusted, EPS diluted-adjusted and adjusted automotive free cash flow purposes. The majority of these charges will be incurred in the fourth quarter of 2018 and first quarter of 2019, with some additional costs incurred through the remainder of 2019.

Editorial comment from the Car Pro: 

I am all for cutting the fat from GM.  We all remember 2009 when GM needed a bailout from the U.S. Government.  However, to cut this many employees, before the holidays, to me is cruel and not smart.

Moreover, the purpose of these cuts is to free up money for electric and autonomous vehicles, which are shrouded in mystery and there is no evidence there is even a market for them.

As I said in a recent Sound Off, stick to what you are good at GM, making vehicles that people want to buy, without all the speculation:

https://www.carprousa.com/car-pro-sound-off-re-writing-ford-gm-mission-statements

Car Pro Sound Off: Re-Writing Ford & GM Mission Statements

Photo Credit: Linda Parton/Shutterstock

25 Comments
  1. Jeff 2 weeks ago

    I am from Youngstown, Ohio which is right next to Warren. The closing of Lordstown may help the GM bottom line, but it will devestate the thousands living in the area creating an even greater economic impact beyond their corporation. The closing of the steel mills in the late 70’s delivered the first Big Crunch to the area, but this may hurt for decades to come causing depression like symptoms to the Mahoning Valley.

    • Car Pro 2 weeks ago

      I agree Jeff. The closing is also unnecessary. Build better cars that people want to buy and you can run the plants at full speed.

      Jerry Reynolds, President
      Car Pro Radio Network

  2. Walt Hall 2 weeks ago

    100s maybe 1,000s of employees will have a Mary Barra Christmas. But I’m sure she and her decision making staff will have a very Merry Christmas.
    Mary and her folks are no different than the elitists that are running our government into the ground, making decisions benefitting only a very small percentage of the National good.
    Very sad indeed.

    • Car Pro 2 weeks ago

      OH no, not getting into this!

      Jerry Reynolds, President
      Car Pro Radio Network

  3. Gary Pisciotto 2 weeks ago

    Very unfortunate decision making by GM. Wait until there is actually a market for the 21st century version of “funny cars” before altering the production landscape.

    • Car Pro 2 weeks ago

      My point exactly. NO evidence the masses want either electric or autonomous cars. Why sink BILLIONS into it before knowing?

      Jerry Reynolds, President
      Car Pro Radio Network

  4. Jim 2 weeks ago

    As commented on Twitter @CarProShow: This is the toughest business to be in. Capital and labor intensive, extremely competitive arena, unionized labor, constant shifting consumer preferences, outdated and inefficient distribution system and a clear lack of strong top leadership for many years/decades. The hatchet approach to cost cutting never works well and GM seems to repeat history every 8-10 years. To your point Jerry, focus on the blocking and tackling basics – built quality cars people want, and treat your employees well (especially during the holidays).

    • Car Pro 2 weeks ago

      Thanks Jim. I get planning for the future, but know what the future holds, don’t guess or speculate with millions and billions of dollars of stockholders money.

      Jerry Reynolds, President
      Car Pro Radio Network

  5. Kate 2 weeks ago

    We the American taxpayers footed the bill for the Bailout GM received, and President Trump indicated GM still receives “subsidies” that he is considering stopping for GM. What would be these “subsidies” — and how much is it — and in what way(s) would “cutting them” even affect GM?

    • Car Pro 2 weeks ago

      Kate, there is a $7500 federal tax credit for people who buy hybrids and electric vehicles. The President is talking about eliminating those for GM, but all car companies get those, so I’m not sure how he would do that. But you never know! Time will tell us.

      Jerry Reynolds, President
      Car Pro Radio Network

  6. Joseph Zima 2 weeks ago

    One thing that GM needs to do is find a new ad agency. The Chevy and Buick TV commercials that play here in the Chicago area are shallow and rather stupid. They seem to be aimed at simpletons.

    • Car Pro 2 weeks ago

      Agreed Joseph, it’s a trend I see a lot. My philosophy has always been “let the car be the star” and if you build pretty cars, they’ll sell. Make cars that excite people. Probably old school thinking, but it worked for me for a lot of years.

      Thanks for weighing in.

      Jerry Reynolds, President
      Car Pro Radio Network

  7. David L Wolf 2 weeks ago

    Your closing comments, Jerry, says it all to those who will lose their jobs… “Merry Christmas to our GM family… except for those who are now losing their jobs.” …Mary Barra. Ebenezer Scrooge would be so proud. smh…

    • Car Pro 2 weeks ago

      Thanks David. I agree, poor timing, bad PR, and a flawed business plan. I won’t be in favor of the next round of bailouts and that seems to be the direction GM is heading.

      Jerry Reynolds, President
      Car Pro Radio Network

  8. Ken Smitley 2 weeks ago

    I got 400,00 miles out of my 2008 Toyota Rav 4, same engine and tranny. The car never leaked a drop of oil. I am an American and believe in American products but with my auto living here in SoCA I need dependable transportation. I’m a salesman so I’m on the road daily. The Japanese have proven to produce reliable products that last longer with significantly less maintenance. Like you said earlier, build reliable products that people can count on and that’s the ticket. Thanks
    Ps., no offense GM but evidence is evidence.

    • Car Pro 2 weeks ago

      Thanks for the feedback Ken. The Detroit 3 have closed the gap a lot, no doubt about it, but I am thankful for the Japanese automakers for forcing that change. Otherwise, we’d be stuck in the horrible rut of the 1980s crap that came out of Michigan.

      Always let me know if I can help you!

      Jerry Reynolds, President
      Car Pro Radio Network

  9. Richard 2 weeks ago

    Car buyers must send a message to GM. This type of behavior will not be tolerated. Stop buying GM cars and start supporting other US manufacturers.

  10. Rick 2 weeks ago

    America is no longer a big player in space programs, but rather a part of world-wide cooperation. With respect to the auto industry, there is at least a dozen major manufacturers world-wide who have plants in the US.

    I’m not seeing a need for interfering with free enterprise. The U.S. saved General Motors once. Fool me once, shame on you. Fool me twice, shame on me.

    • Car Pro 2 weeks ago

      Thanks for sharing your thoughts Rick, and thanks for listening to the show!

      Jerry Reynolds, President
      Car Pro Radio Network

  11. BiggieGuana 2 weeks ago

    For companies whose fiscal year ends on 12/31, they want to lay people off before the year end so that they can expense the severance packages. If they wait until January, then they’ll be starting the new fiscal year with a huge expense sitting on their books.

    • Car Pro 2 weeks ago

      True, but there are not closing any plants this year, they are closing them in 2019. There was no need in stressing all these people out for the holidays.

      Jerry Reynolds, President
      Car Pro Radio Network

  12. tim 2 weeks ago

    Is everyone forgetting the Volt was touted as the savior of GM just ten years ago???
    So how is this decision going to be any better???
    I would say GM’s record of predicting the future is not that good…

    • Car Pro 2 weeks ago

      Volt has been a great car, the people who own them absolutely love them. I really hate to see them go away.

      Jerry Reynolds, President
      Car Pro Radio Network

  13. Ron Parker 2 weeks ago

    In light of this, I find Chevy recycling their TV ads touting friends and family discounts pretty distasteful, since they feature employees and their families raving about the cars and the company. Happy holidays my foot.

    • Car Pro 2 weeks ago

      Valid point. I had not thought of that!

      Jerry Reynolds, President
      Car Pro Radio Network

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