In a huge restructuring, US car giant General Motors announced on
Monday it will cut 15% of its workforce to save $6bn and adapt to
“changing market conditions”.
The moves include shuttering seven plants worldwide as the company
responds to changing customer preferences and focuses on popular trucks
and SUVs and increasingly on electric models. Wall Street cheered the
actions, while US and Canadian leaders expressed outrage.
The closures also drew sharp criticism from the US and
Canadian
labour union representing GM workers, which accused the company of
shifting production overseas at the expense of North American workers.
The job cuts from GM’s current 180,000-strong work force will be
particularly stinging in politically crucial areas of Ohio and Michigan,
a region US President Donald Trump has promised to revive.
“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 CEO Mary Barra said in a statement.
“We recognise the need to stay in front of changing market conditions
and customer preferences to position our company for long-term
success.”
Trump expressed dismay at the plan and said he was “very tough” with Barra when they discussed the reorganisation.
“I spoke with her when I heard they were closing and I said, ‘You
know, this country has done a lot for General Motors. You better get
back in there soon,’” he told reporters at the White House. “They better
put something else in.”
Barra also met at the White House with Trump’s senior economic
adviser Larry Kudlow, in what officials said was a previously scheduled
meeting.
Trump’s aggressive trade policies have been aimed
specifically at saving US manufacturing jobs, including the
renegotiation of the North American Free Trade Agreement (Nafta), which
took aim at rules governing car trade to favour the US industry.
Still, GM will shutter three North American car assembly plants in
2019: the Oshawa plant in Ontario, Canada; Hamtramck in Detroit,
Michigan; and Lordstown in Warren, Ohio.
In addition, GM will close two US propulsion plants — which produce
batteries and transmissions — in Baltimore, Maryland, and Warren,
Michigan, as well two unidentified plants outside North America.
The company already had announced plans to cease operations at its Gunsan, South Korea plant.
While the company said in its quarterly earnings late in October that
it saw costs jump by $400m due to Trump’s tariffs on steel and
aluminium, a spokesperson said the latest decisions “are not related to
any recent trade or tariff decisions”.
‘Deep disappointment’
Senator Sherrod Brown, an Ohio Democrat, lambasted GM’s move as
“corporate greed at its worst” and also took a swipe at the 2017 tax cut
favoured by Trump which was touted as a jobs winner.
“The company reaped a massive tax break from last year’s GOP tax bill
and failed to invest that money in American jobs,” Brown said on
Twitter.
In Canada, Prime Minster Justin Trudeau expressed “deep disappointment” with the plant closure.
Workers at the Ontario plant staged a wildcat strike to protest the closure.
The job cuts will include a 25% reduction in executive-level employees to “streamline decision making”, the company said.
According to reports, the five North American plants concerned employ
nearly 7,000, including 3,000 workers in the Ontario plant.
GM shares jumped after the announcement, closing up 4.8% on the day. Analysts were generally upbeat about the news.
“In contrast to times past, General Motors under CEO Mary Barra is
trying to get ahead of a potential crisis by making cuts now,” Michelle
Krebs of Autotrader said in a client note.
While GM has been increasing its focus on highly popular trucks and
SUVs, the company said it would also prioritise investment in
“next-generation battery-electric architectures”.
In an investor call, Barra said some GM cars would no longer be available in North America, including the Chevrolet Cruze.
‘Slap in the face’
UAW, the car workers union, blasted GM’s decision, saying the company
was just looking for cheaper workers, and vowed to fight back.
“This callous decision by GM to reduce or cease operations in
American plants, while opening or increasing production in Mexico and
China plants for sales to American consumers, is, in its implementation,
profoundly damaging to our American workforce,” said UAW vice-president
Terry Dittes.
China has become an increasingly important market for the carmaker
and in the first nine months of 2018, it sold 2.7-million cars in China
compared with 2.6-million in all of North America.
However, spokesperson Julie Huston-Rough denied the charge, saying
that “these products will not be manufactured in other locations for the
North American market”.
She also said the company remains committed to its facilities in
Ohio, despite the closure of the Lordstown plant, with six other
locations and 4,000 employees, as well has hundreds of suppliers and
dealers.
Jerry Dias, president of Unifor, the Canadian labour union, said he
“will vigorously fight again to maintain these good-paying auto jobs”.
Huston-Rough said the job cuts will be accomplished through “a combination of retirements, layoffs and work relocations”
.
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