GM significantly reduces work and production, cancels some car models

DETROIT / WASHINGTON (Reuters) – General Motors Co will cut auto production, stop building a number of slow-selling models and cut its North American workforce, its biggest restructuring in North America since it went bankrupt a decade ago.

GM plans to shut down production next year at three assembly plants: Lordstown (Ohio), Hamtramck (Michigan) and Oshawa (Ontario). The company also plans to stop building several models assembled in these plants, including the Chevrolet Cruze, Cadillac CT6 and Buick LaCrosse.

GM said investments in electric and autonomous vehicles would be more important.

The issue will be addressed in discussions with the United Auto Workers Union next year. GM chief executive Mary Barra phoned early Monday to announce the plan.

"We are scaling our capacity to market realities," said Mary Barra, CEO, adding that the cuts brought about by the changes in the auto industry.

GM shares rose 2.2% to $ 36.72 before being stopped.

Cost pressures for GM and other automakers and suppliers increased as demand for traditional sedans declined. The company said the tariffs on imported steel, imposed earlier this year by the Trump administration, cost it $ 1 billion.

Unifor Canadian, Unifor, which represents most of the unionized auto workers in Canada, said Sunday that GM had announced that no proceeds would be awarded to the Oshawa plant, located approximately 37 km (60 km) from Toronto, after December 2019.

GM employs approximately 2,500 union members in Oshawa, which produces Chevrolet Impala and Cadillac XTS sedans. It also complements the final assembly of the best selling Silverado and Sierra pickup trucks, which are shipped from Indiana.

GM has begun what should be a long and costly transition to a new business model that includes electrified and automated vehicles, many of which will be shared rather than owned.

The # 1 US automaker announced the latest tightening of the belt in late October by offering to buy 50,000 salaried employees in North America in an effort to downsize 18,000 people. He plans to reduce by 25% the number of its leaders, said the source.

With US car sales lagging, many factories now have only one workstation, including the Hamtramck and Lordstown assembly plant.

In general, the automotive industry estimates that if a plant has a production capacity of less than 80% of its production capacity, it loses money. GM has several factories that work well below that. Consultancy LMC estimates that Lordstown will only operate at 31% of its production capacity in 2018.

Rivals Ford Motor Co and Fiat Chrysler Automobiles NV both reduced their production of US cars. Ford announced in April its intention to stop building almost all cars in North America.

SALE OF SEDAN SLUMPING

A general slowdown in passenger car sales has begun to accelerate in 2017.

US consumer preferences have gradually shifted away from passenger cars to larger, more comfortable SUVs and trucks, leaving car manufacturers struggling to readjust.

In 2012, passenger cars accounted for more than 50% of all new vehicle sales in the United States. In the first nine months of 2018, this percentage had fallen to just over 31%.

More than 16 months ago, the UAW confirmed that it was discussing with GM the potential threat to factories and jobs from the fall in sales of US sedans.

While passenger car sales in the industry fell by 13.2% in the first nine months of the year, van and SUV sales increased 8.3%. In addition to being more spacious, fuel consumption on SUVs and crossovers has improved significantly.

Sales of the Cruze, built in Lordstown, fell by 27% until September 2018.

Impala, which is built in Oshawa and Hamtramck, fell 13%.

Buick LaCrosse and Cadillac CT6, which are built at Hamtramck, fell by 14% and 11%, respectively.