GM job cuts, plant closing part of its plan for future


December 3, 2018 5:01 am

DETROIT — On the day CEO Mary Barra outlined the largest round of job cuts and plant shutdowns in nearly a decade last week, General Motors also was having an orientation for new hires around the corner.

Such a juxtaposition has become common for GM as Barra and her executive team implement billions of dollars in cost-cutting measures in preparation for the next economic downturn and shift the company’s focus toward costly, emerging technologies such as autonomous and fully electric vehicles. Shrinking its employee ranks is part of the plan, especially on the manufacturing side of its business, but GM also is sending a message that it’s working to change the makeup of the work force that remains.

“We are going to continue to hire, because when we look at the skill sets that we need for the future, the vehicle has become much more software-oriented, when you think about the hundreds of millions of lines of code that are in a vehicle that operates today,” Barra told reporters. “That’s only going to increase.”

Barra: Different skill sets needed

While Barra and her executive team have consistently defended such measures as proactive and necessary, they come with significant risks and consequences. Business cases for electrified and autonomous vehicles remain unproven, and nearly a decade after GM’s federally backed bankruptcy, the company again is becoming a political football. It also will have to tread lightly to not overplay its hand during union negotiations.

“It makes sense for GM to do this right now, but it’s a more difficult time for it to be accepted, certainly in the union and in the marketplace in general,” said Jeff Schuster, president of LMC Automotive’s Americas operations.

The most recent actions included plans to cut 15 percent of its 54,000 North American salaried jobs, including a quarter of its global executives, and to end production at five North American plants in 2019, when it will discontinue the Chevrolet Cruze and five other cars. GM said it also would close two unidentified plants elsewhere in the world by the end of next year.

GM did not definitively say it would close the North American plants — including Oshawa Assembly in Ontario, Lordstown Assembly in Ohio and Detroit-Hamtramck Assembly in Michigan — but rather that they would end production and not be given new vehicles to build. Powertrain plants in Warren, Mich., and Baltimore don’t have products assigned after next year either.

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Plants don’t necessarily close when they have no new products scheduled, but the moves put their future and jobs at risk heading into contract negotiations with the UAW in 2019 and Canada’s Unifor in 2020. The affected factories have roughly 6,700 hourly and salaried employees — 3,800 in the U.S. and 2,900 in Canada.

Barra said the moves were meant to be proactive and were not a response to “anything specific on the horizon.”

Last week’s announcement followed voluntary buyout offers to 18,000 salaried GM workers with at least 12 years of experience. Because the company did not hit its targets, it now plans layoffs as well.

Political football

As Wall Street last week praised GM’s cost-cutting measures, expected to save the automaker $6 billion annually by 2020, union and political leaders condemned the moves as shortsighted and a betrayal to its country and work force.

President Donald Trump, who told supporters at a 2017 rally near the Lordstown plant to not sell their houses because factories in the region would reopen, said he was “not happy” with the decision and spoke “very tough” to Barra about the moves. The next day, he said on Twitter that the administration is now “looking at cutting all GM subsidies, including for electric cars” but did not provide any details on how that might occur.

GM responded by saying it remains committed to “maintaining a strong manufacturing presence in the U.S.” The company said it appreciates the actions the administration has taken “on behalf of industry to improve the overall competitiveness of U.S. manufacturing.”

Potential to close









GM could close up to 5 plants in North America as it ends production of 6 car nameplates and consolidates pickup production, affecting as many as 6,700 salaried and hourly employees. Here’s a look at the potential closures.
Plant Products and end date Employees
Detroit-Hamtramck Assembly (Michigan) Buick LaCrosse, Chevrolet Volt; March 1; Cadillac CT6, Chevrolet Impala; June 1 1,542
Lordstown Assembly (Ohio) Chevrolet Cruze; March 1 1,618
Oshawa Assembly (Ontario) Chevrolet Impala, Cadillac XTS, outgoing Chevrolet Silverado/GMC Sierra; Q4 2019 2,900
Warren Transmission Operations (Michigan) 6-speed transmissions; Aug. 1 335
Baltimore Operations (Maryland) 5-speed and 6-speed transmissions; April 1 310
Source: GM

The Democratic Party used the announcement as ammunition to berate the Republican president. “Trump promised autoworkers that they wouldn’t lose one plant if he was elected and that General Motors would create jobs in the United States,” the party said on Twitter. “Now, General Motors is planning to close multiple factories and lay off even more workers.”

The UAW vowed to “confront” GM’s decisions “through every legal, contractual and collective bargaining avenue,” while Unifor President Jerry Dias promised “one hell of a fight here in Canada with General Motors.”

By Wednesday, Nov. 28, the political pushback wiped out the 4.8 percent jump in GM shares that followed the job-cut announcement two days earlier.

Doubling down

GM’s actions are meant to increase the automaker’s profits and strengthen its core business while it doubles investment in autonomous and battery-electric vehicles by 2020 — a year before the automaker is expected to launch an all-new profitable EV platform.

“I think these actions demonstrate our continued focus on driving cost efficiencies and supporting the ongoing work to make General Motors more agile, resilient and profitable to position the company for long-term success,” Barra said.

All the vehicles made at the three targeted assembly plants — the Buick LaCrosse, Cadillac CT6 and XTS, and Chevrolet Cruze, Impala and Volt — are scheduled to stop being produced for the U.S. by the end of 2019.

GM has said it believes self-driving and fully electric vehicles could eventually eclipse profits of its current operations. But today, they’re unprofitable.

“This is the part that scares me across the industry, everyone focusing so much on new mobility — it’s such a long-term play,” said Joe Langley, associate director of IHS Markit.

Autonomous vehicles remain in testing and face safety and regulatory hurdles, while battery-electric vehicles represent roughly 1 percent of U.S. sales this year, according to IHS Markit.

Langley said GM’s plan to kill the cars wasn’t surprising, but doing it “so quickly is a new phenomenon.”

GM sold more than an estimated 225,000 of the six doomed cars in the U.S. this year through October, according to the Automotive News Data Center. The Cruze accounted for more than half of that volume and is GM’s third-biggest seller this year.

Union negotiations

Barra declined to say whether the plants could restart production as a result of union negotiations. She told analysts that the company is “committed to working with GM’s unions,” but it will be a balancing act for the company to not overplay its hand.

U.S. plant closures must be negotiated with the UAW, which could refuse to agree to a collective bargaining agreement and strike the automaker’s plants nationwide — halting production of highly profitable pickups and SUVs that are subsidizing the costs of autonomous and electrified vehicles.

GM’s contract with Unifor gives it more flexibility to close Canadian plants, requiring only a year’s notice to the union.

“There’s already a war drum beating,” said LMC’s Schuster. “You have to be careful it doesn’t essentially ignite a bigger issue, which spreads through the membership. There’s a lot of risk doing this at any point and time.”

Kristin Dziczek, vice president of industry, labor and economics at the Center for Automotive Research, said the announcements could be a wakeup call for rank-and-file members.

“These are real stakes in front of the bargaining team next year for the negotiations,” she said. “It might actually help the membership focus on jobs and survival more than getting more, more and more in terms of raises, benefits and bonuses.”

GM U.S. plant utilization rates are the lowest in the industry. Its assembly plants represented about 1 million of the 3.2 million units of underutilized capacity this year through October, according to Dziczek.

If all three assembly plants close, GM would lower its capacity by 845,000 units, according to LMC. Schuster said he doesn’t expect any to remain open without significant pressure from the UAW.

“There is SUV and CUV capacity still to pick up some of this lost volume on the car side,” Schuster said. “The only way they keep one of those two plants open, aside from Oshawa, is union pressure. But they really don’t need it.”

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