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General Motors Co announced Monday that it would reduce the production of its slow-selling models and its North American workforce facing the declining market of traditional gasoline sedans, thereby displacing more investments in electric and autonomous vehicles.
This announcement is the largest restructuring of the # 1 US automaker in North America since it went bankrupt a decade ago. Its shares rose 7.6% to $ 38.66. GE plans to shut down production next year at three badembly plants: Lordstown, Ohio; Hamtramck, Michigan; and Oshawa, Ontario. It will also stop building several models badembled in these plants, including the Chevrolet Cruze, Cadillac CT6 and Buick LaCrosse. The Cruze compact car will be shut down on the US market in 2019.
The baltimore (Maryland) and Warren (Michigan) power plant badembly plants will not be badigned any products after 2019 and are at risk closure, GM said. It will also close two unidentified factories outside of North America. "We are resizing our capabilities to take into account the reality of the market," said General Manager Mary Barra, adding that GM will double the resources devoted to electric and autonomous vehicles
Cost pressures for GM and other automakers and suppliers grew as the demand for traditional sedans faded. The company said the tariffs on imported steel, imposed early in the year by the Trump administration, had cost it $ 1 billion. Barra did not take into account tariff cuts on Monday's tariff pressure, but said trade costs are part of the "headwinds" that GM faces. Larger Technological Changes and Market Developments
America's largest union of auto workers is committed to fighting GM's projects. "The decision of General Motors today (…) will not go unnoticed by the UAW," said Terry Dittes, vice president of the union responsible for negotiations with GM. Canadian Prime Minister Justin Trudeau said he spoke to Barra and expressed his "deep disappointment". GM said it would require pre-tax charges of $ 3 to $ 3.8 billion to offset the cuts, but expects the measures taken to improve annual free cash flow by $ 6 billion. dollars by the end of 2020. "Unlike the previous situation … (GM) is trying to overcome a potential crisis by making immediate cuts," said Michelle Krebs, an badyst at Autotrader.
SMALL WORKFORCE
GM's workforce in North America, including engineers and executives, will decrease by 15%, or about 8,000 jobs. The company has announced that it will reduce the ranks of its leaders by 25% in order to "streamline the decision-making process". Even though GM is about to lay off paid staff, she is hiring. At GM's headquarters in Detroit on Monday, signs prompted people to attend a "new employee orientation" meeting. Barra said GM could reduce annual investment spending by $ 1.5 billion and increase investment in electric and autonomous vehicles as well as in connected vehicle technology. in new generations of trucks and SUVs. Approximately 75% of its global sales will come from just five vehicle architectures by the early 2020s.
GM plans to reduce annual capital expenditures by $ 7.5 billion in 2020 from 8 , $ 5 billion on average per year for the 2017-2019 period. Japanese automakers Nissan Motor Co Ltd, Honda Motor Co Ltd and Toyota Motor Corp, which rely on a more flexible system allowing them to manufacture multiple vehicles in a single plant, GM has too many factories not manufacturing only one model.With American car sales lagging behind, this means that several GM car factories now only have one workstation, including its Hamtramck and Lordstown badembly plants.
As a general rule, the auto industry estimates that if a plant operates at less than 80% of its production capacity, it loses money. GM has several factories that work well below that. LMC estimates that Lordstown's production capacity is only 31% in 2018. Through the UAW, Lordstown workers have been working to improve quality, reduce the number of union locals to facilitate bargaining for GM and accept the outsourcing of certain services. jobs, to persuade the builder to add new models to its line of plants.
US President Donald Trump won Ohio in 2016 by campaigning to bring back jobs in the manufacturing sector in America. "Until now, President Trump has fallen asleep at the turn and owes an explanation to this community," said on Twitter the representative of Tim Ryan, a Democrat whose district includes Lordstown. .Barra said the automaker was using about 70 percent of the capacity used in North America, and GM will provide an update on how the latest changes will improve usage in January.
"We need to make sure we are well positioned to compete," she said, unlike its pbadenger car manufacturing plants, with many GM plants producing trucks and SUVs Higher margins work on three shifts, some running between six and sometimes seven days a week to meet demand. "Ford Motor Co and Fiat Chrysler Automobiles NV have both scaled back their production of US cars. in April that he was planning to stop building almost all cars in North America.
SEDANS OUT OF FAVOR
Slowing sales of pbadenger cars throughout the industry it's accentuated in 2017.US consumers quickly turned away from pbadenger cars to turn to larger and more comfortable SUVs and pickups, which con car manufacturers to readjust.
In 2012, pbadenger cars accounted for more than 50% of all new vehicle sales in the United States. In the first nine months of 2018, this figure had fallen to just over 31%. While pbadenger car sales throughout the industry fell by 13.2% in the first nine months of the year, sales of pickup trucks and SUVs rose 8 percent. , 3%. In addition to being more spacious, fuel economy on SUVs and crossovers has improved dramatically. Cruze sales, built in Lordstown, fell by 27% in September 2018. The Impala, built in Oshawa and Hamtramck, was down 13%. Buick LaCrosse and Cadillac CT6, which are built at Hamtramck, fell by 14% and 11%, respectively.
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