DETROIT/WASHINGTON (Reuters) – General Motors Co will cut car production, stop building several slow-selling models, and slash its North American workforce, its biggest restructuring in North America since its bankruptcy a decade ago.
The General Motors assembly plant in Oshawa, Ontario, Canada November 26, 2018. REUTERS/Carlos Osorio
GM plans to halt production next year at three assembly plants – Lordstown, Ohio, Hamtramck, Michigan, and Oshawa, Ontario. The company also plans to stop building several models now assembled at those plants, including the Chevrolet Cruze, the Cadillac CT6 and the Buick LaCrosse.
GM said it will shift more investment to electric and autonomous vehicles.
The issue will be addressed in talks with the United Auto Workers union next year. GM Chief Executive Officer Mary Barra made calls early on Monday to disclose the plan.
“We are right sizing capacity for the realities of the marketplace” CEO Mary Barra said, adding that the cuts prompted by auto industry changes.
GM shares were last up 2.2 percent at $36.72 before being halted.
Cost pressures on GM and other automakers and suppliers have increased as demand waned for traditional sedans. The company has said tariffs on imported steel, imposed earlier this year by the Trump administration, have cost it $1 billion.
A Canadian union, Unifor, which represents most unionized auto workers in Canada, said Sunday it was informed by GM that there would be no product allocated to the plant in Oshawa, about 37 miles (60 km) from Toronto, after December 2019.
GM employs about 2,500 union staff in Oshawa, which produces both the Chevrolet Impala and Cadillac XTS sedans. It also completes final assembly of the stronger-selling Silverado and Sierra pickup trucks, shipped from Indiana.
GM has begun what is expected to be a long and expensive transition to a new business model that embraces electrified and automated vehicles, many of which will be shared rather than owned.
The No. 1 U.S. automaker signaled the latest belt-tightening in late October when it offered buyouts to 50,000 salaried employees in North America, with the aim of reducing headcount by 18,000. It plans to trim executive ranks by 25 percent, the source said.
With U.S. car sales lagging, several car plants have fallen to just one shift, including its Hamtramck and Lordstown, assembly plant.
A rule of thumb for the automotive industry is that if a plant is running below 80 percent of production capacity, it is losing money. GM has several plants running well below that. Consultancy LMC estimates that Lordstown will operate at just 31 percent of production capacity in 2018.
Rivals Ford Motor Co and Fiat Chrysler Automobiles NV have both curtailed U.S. car production. Ford said in April it planned to stop building nearly all cars in North America.
SLUMPING U.S. SEDAN SALES
An industrywide slowdown in passenger car sales started to pick up steam in 2017.
The shift by U.S. consumer preferences have been away from passenger cars to larger, more comfortable SUVs and pickup trucks has been swift and severe, leaving automakers scrambling to readjust.
As recently as 2012, passenger cars made up more than 50 percent of all U.S. new vehicle sales. Through the first nine months of 2018, that had fallen to a little over 31 percent.
More than 16 months ago, the UAW confirmed that it was discussing with GM the potential threat to plants and jobs from slumping U.S. sedan sales.
While industry-wide passenger car sales were down 13.2 percent through the first nine months of the year, pickup truck and SUV sales rose 8.3 percent. As well as being roomier, the fuel economy on SUVs and crossovers has improved significantly.
Sales of Cruze, built at Lordstown, fell 27 percent through September 2018.
Impala, which is built at Oshawa and Hamtramck, was down 13 percent.
Buick LaCrosse and Cadillac CT6, which are built at Hamtramck, were down 14 percent and 11 percent, respectively.
Reporting by David Shepardson and Nick Carey; Additional reporting by Paul Lienert; Writing by Nick Zieminski; Editing by Susan Thomas and Jeffrey Benkoe