BUSINESS
11/26/2018 11:13 am ET Updated Nov 26, 2018

GM To Cut Up To 14,000 Jobs And Close Plants In North America

A restructuring of the motor company will leave thousands of factory and white-collar workers out of a job.

By TOM KRISHER, AP Auto Writer

DETROIT (AP) — General Motors will cut up to 14,000 workers in North America and put five plants up for possible closure as it abandons many of its car models and restructures to cut costs and focus more on autonomous and electric vehicles.

The reduction includes about 8,000 white-collar employees, or 15 percent of GM’s North American white-collar workforce. Some will take buyouts while others will be laid off.

At the factories, around 3,300 blue-collar workers could lose jobs in Canada and another 2,600 in the U.S., but some U.S. workers could transfer to truck or SUV factories that are increasing production.

The company also said it will stop operating two additional factories outside North America by the end of next year, in addition to a previously announced plant closure in Gunsan, Korea.

The restructuring reflects the changing U.S. and North American auto markets as a dramatic shift away from cars toward SUVs and trucks continues. In October, almost 65 percent of new vehicles sold in the U.S. were trucks or SUVs. It was about 50 percent cars just five years ago.

GM is shedding cars largely because it doesn’t make money on them, Citi analyst Itay Michaeli wrote in a note to investors.

“We estimate sedans operate at a significant loss, hence the need for classic restructuring,” he wrote.

General Motors Co.’s pre-emptive strike to get leaner before the next downturn likely will be followed by Ford Motor Co., which has said it is restructuring and will lay off an unspecified number of white-collar workers. Toyota Motor Corp. also has discussed cutting costs, even though it’s building a new assembly plant in Alabama.

GM isn’t the first to abandon much of its car market. Fiat Chrysler Automobiles got out of small and midsize cars two years ago, while Ford announced plans to shed all cars but the Mustang sports car in the U.S. in the coming years.

Shares of GM, the largest automaker in the U.S. which sells the Chevrolet, Buick, Cadillac and GMC brands, rose nearly 6 percent on the news to $37.93 in midday trading Monday.

GM said the moves will save $6 billion in cash by the end of next year, including $4.5 billion in recurring annual cost reductions and a $1.5 billion reduction in capital spending.

Those cuts are in addition to $6.5 billion that the company has announced by the end of this year.

GM doesn’t foresee an economic downturn and is making the cuts “to get in front of it while the company is strong and while the economy is strong,” CEO Mary Barra told reporters.

She also noted that tariffs on imported aluminum and steel have hit the company, but she stopped short of saying they had anything to do with the restructuring.

If all the factory workers are laid off, the reductions announced Monday would be about would be about 8 percent of GM’s global workforce of 180,000 employees.

The reductions could ripple through auto parts suppliers such as Aptiv and Magna International, Michaeli said.

Many of those who will lose jobs are now working on conventional cars with internal combustion engines. Barra said the industry is changing rapidly and moving toward electric propulsion, autonomous vehicles and ride-sharing, and GM must adjust.

She said GM is still hiring people with expertise in software and electric and autonomous vehicles. The company has invested in newer architectures for trucks and SUVs so it can cut capital spending while still raising investment in autonomous and electric vehicles.

GM has offered buyouts to 18,000 retirement-eligible workers with a dozen or more years of service. It would not say how many have accepted the buyouts, but it was short of the company’s target because GM said there will be white-collar layoffs.

The company expects to take a pretax charge of $3 billion to $3.8 billion due to the actions, including up to $1.8 billion of asset write downs and pension charges. The charges will take place in the fourth quarter of 2018 and the first quarter of next year.

Most of the factories to be affected by GM’s restructuring build cars that won’t be sold in the U.S. after next year. They could close or they could get different vehicles to build. Their futures will be part of contract talks with the United Auto Workers union next year.

The Detroit-based union has already condemned GM’s actions and threatened to fight them “through every legal, contractual and collective bargaining avenue open to our membership.”

Among the possibilities on the chopping block are the Detroit/Hamtramck assembly plant, which makes the Buick LaCrosse, the Chevrolet Impala and Volt, and the Cadillac CT6, all slow-selling cars. LaCrosse and Volt production will end March 1, while CT6 and Impala production would stop June 1.

The plant in Lordstown, Ohio, which makes the Chevrolet Cruze compact car also is on the list, and Barra said the Cruze would no longer be sold in the U.S. Production would stop March 1.

Work on six-speed transmissions made at the Warren, Michigan, transmission plant would stop Aug. 1, while the Baltimore transmission plant would stop production April 1, GM said.

Meanwhile, GM’s plant in Oshawa, Ontario, will stop making the Impala, Cadillac XTS and 2018 full-size pickups in the fourth quarter of next year. The Canadian plant appeared to be most in danger of closing.

Ontario Premier Doug Ford said he talked to the head of GM on Sunday and was told “the ship has already left the dock” when he asked if there was anything Ontario could do.

Canadian Prime Minister Justin Trudeau said he spoke to Barra on Sunday to express his “deep disappointment” with the closure.

___

Associated Press Writer Rob Gillies in Toronto contributed to this report.

___

This story has been corrected to show that up to 14,000 workers could lose jobs instead of 14,700.

CONVERSATIONS