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GM announces restructuring plan to reduce car production, cut jobs

26 November 2018

General Motors announced a massive restructuring plan that involves closing seven manufacturing plants worldwide—including five plants in North America—discontinuing several slow-selling vehicle models, and a reduction of more than 14,000 jobs. The actions would allow the company to “strengthen its core business, capitalize on the future of personal mobility and drive significant cost efficiencies.”

The restructuring plan is expected to increase annual adjusted automotive free cash flow by $6 billion by year-end 2020. Contributing to these cash savings are cost reductions of $4.5 billion and a lower capital expenditure annual run rate of almost $1.5 billion.

Four assembly and propulsion plants in the United States and one in Canada would be shut down, unless the automaker comes up with an agreement with the unions and the authorities to allocate more work to those facilities. The list of plants considered for closure by the end of 2019 includes:

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

GM plans to discontinue a number of models, mostly sedans, due to slow sales. According to media reports, the list of models to be discontinued in the North American market by the end of 2019 includes the plug-in hybrid Chevrolet Volt, Chevrolet Cruze, Chevrolet Impala, Buick LaCrosse, Cadillac XTS, and Cadillac CT6. GM will also discontinue the previous generation Chevrolet Silverado pick-up that is still built in Oshawa.

The automaker is taking actions to reduce salaried and salaried contract staff by 15%, which includes 25% fewer executives “to streamline decision making”. 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 incurred in the fourth quarter of 2018 and first quarter of 2019, with some additional costs incurred through the remainder of 2019.

Possible reasons behind the restructuring include the expected contraction of the US new vehicle market—with many forecasters predicting the annual vehicle sales to fall from the current 17 million to about 15 million within a few years—a shift in consumers’ preferences away from sedans to crossovers and SUVs, and higher costs due in part to the US steel tariffs.

Another important source of rising costs is the development of electric and autonomous vehicle technologies that could cost GM tens of billions of dollars over the next decade. The automaker said that resources allocated to electric and autonomous vehicle programs—such as money going into the GM Cruise self-driving technology unit—will double in the next two years. GM is also developing 20 fully electric vehicle models to sell globally starting from 2023.

Source: General Motors | Bloomberg