General Motors will lay off up to 14,000 factory and white-collar workers in North America and consider closing up to five major plants as the auto giant restructures to cut costs and focus more on electric vehicles and autonomous cars. The company-wide restructuring was announced Monday.
GM said it would halt production at three assembly plants: Lordstown Assembly in Warren, Ohio; Detroit-Hamtramck Assembly in Michigan and Oshawa Assembly in Ontario, Canada. It also plans to close transmission plants next year in White Marsh, Maryland, and Warren, Michigan, the company said in a news release.
Most of the affected factories build cars that won't be sold in the U.S. after next year, including the Chevrolet Volt rechargeable gas-electric hybrid. 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 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," GM Chairman and CEO Mary Barra said in a statement that projected $6.5 billion in cost cuts in 2018. "We recognize the need to stay in front of changing market conditions and customer preferences to position our company for long-term success."
The reduction includes about 8,000 white-collar workers, some of whom will take buyouts and others who will be laid off. That amounts to roughly 15 percent of GM's 54,000 salaried employees in North America. More than 6,000 factory workers could lose jobs in the U.S. and Canada, although some could transfer to truck and SUV plants.
GM's stock price rose nearly 6 percent, signaling investors' approval of the company's move to cut costs.
"The total number of hourly employees affected is approximately 6,000," a GM spokesperson said by email. "However, many of those could be reassigned to other plants. There will be a number of retirements, layoffs and work reallocations associated with these actions."
The GM announcement will more than double the number of job cuts announced by U.S. companies in the auto industry in 2018, according to tracking by global outplacement and executive coaching firm Challenger, Gray & Christmas.
GM, the largest automaker in the U.S. and includes the Chevrolet, Buick, Cadillac and GMC brands, 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.
In October, GM offered buyouts to 18,000 white-collar workers as part of a cost-cutting initiative. The company said it is aiming to save $6.5 billion in "cost efficiencies" through 2018. GM has yet to say how many workers accepted buyouts, or if it's close to meeting the staff reduction goals it set to better withstand leaner times.
Cutting costs while pivoting to "clean" cars
In recent years GM has worked to slash costs. The company has scaled back production at its plants, with its hourly workforce down by 4,000 people in 2017, according to GM's annual report. The automaker in June ended the second shift at its factory in Lordstown, Ohio, cutting 1,500 workers.
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.
The company's main competitor, Ford, said earlier this month that it would reduce its salaried workforce by the second quarter of 2019.
The Monday closure of GM's plant in Oshawa, Ontario, was first confirmed late Sunday by the Associated Press, which cited an official familiar with the decision. The official spoke on condition of anonymity because they were not authorized to talk publicly ahead of the announcement.
GM workers have been part of the heart and soul of Oshawa for generations - and we’ll do everything we can to help the families affected by this news get back on their feet. Yesterday, I spoke with @GM’s Mary Barra to express my deep disappointment in the closure.— Justin Trudeau (@JustinTrudeau) November 26, 2018
GM workers have been part of the heart and soul of Oshawa for generations - and we’ll do everything we can to help the families affected by this news get back on their feet. Yesterday, I spoke with @GM’s Mary Barra to express my deep disappointment in the closure.
GM needs to reshape the company as it shifts its focus to lower-emitting hybrid vehicles, technology that is not at the forefront at the Canadian plant.
Barra said GM is still hiring people with expertise in software and electric and autonomous vehicles. Many of those who will lose jobs are now working on conventional cars with internal combustion engines.
The company, she said, also is investing in newer architectures for trucks and SUVs so it can cut capital spending while still raising investment in autonomous and electric vehicles.
The factories up for closure are part of GM's effort "to right-size our capacity for the realities of the marketplace," as consumers shift away from cars to trucks and SUVs, Barra said.
Among the facilities that may be closed 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 will 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 will stop March 1.
Industry analysts are already plotting out possible targets for GM, including its sprawling Lordstown plant in northeastern Ohio. The car produced there is also is built in Mexico. The once-bustling factory already has lost two of its three shifts and 3,000 union jobs since the beginning of last year.
But moving that car, the Chevrolet Cruze, south of the border brings the risk of provoking a backlash from President Donald Trump. And GM also isn't sure whether he'll make good on threats to impose 25 percent tariffs on vehicles imported from Canada and Mexico.
Mr. Trump said he told Barra that GM should stop building cars in China and open a new factory in Ohio, the Wall Street Journal reported. "They better damn well open a new plant there very quickly," Mr. Trump told the paper on Monday.
What's more, the Cruze plant just outside Youngtown is in a Democratic and labor stronghold, where Trump won over a surprising number of voters two years ago by reaching out to what he called America's "forgotten men and women."
At a rally near the plant last summer, Trump talked about passing by big factories whose jobs "have left Ohio," then told people not to sell their homes because the jobs are "coming back. They're all coming back."
Altogether, GM has five car factories with plenty of unused capacity in Kansas City, Kansas; Lordstown; and Detroit-Hamtramck, Lansing, and Orion Township, Michigan.
GM opened its factory in Oshawa, near Toronto, in 1953. The plant is used to make the Cadillac XTS and Chevrolet Impala sedans as well as the Chevrolet Silverado and GMC Sierra trucks.
A GM spokesman declined to comment. GM had been expected to close plants because of struggling sales.
Unifor, Canada's largest private sector union, said in a prepared statement that it does not have complete details of Monday's announcement, but it has been informed that there is no product allocated to the Oshawa plant past December 2019.
"Based on commitments made during 2016 contract negotiations, Unifor does not accept this announcement and is immediately calling on GM to live up to the spirit of that agreement," the union said in a statement on its website. "Unifor is scheduled to hold a discussion with General Motors (Monday) and will provide further comment following the meeting."
Oshawa Mayor John Henry said he had not spoken to anyone from GM. Jennifer French, who represents Oshawa in the provincial legislature, said she finds the news "gravely concerning."
"If GM Canada is indeed turning its back on 100 years of industry and community — abandoning workers and families in Oshawa — then this is a callous decision that must be fought," she said in a statement.