GM is to shut seven factories, cut more than 14,000 jobs and axe models

On the face of it, General Motors (GM) looks to be in dire straits. At the end of last month, the US giant announced it was stopping production at five North American plants, three for car assembly and two for engines.

Also on the chopping block are once mainstay family cars such as the Chevrolet Cruze and the larger Chevrolet Impala. The pioneering plug-in hybrid Chevrolet Volt, the replacement for the old Vauxhall Ampera, joins them on the executioner’s platform. Two unnamed international plants are also to be shut. 

It’s the continuation of a withdrawal that started when GM began leaving major global markets, including the UK and mainland Europe, after selling the Vauxhall and Opel brands to the PSA Group in 2017

At the Los Angeles motor show last week, the GM stand gave the impression of difficult times ahead. With no new models to draw the media on press day, the stand cleaners diligently wiped away footprints that had never been laid. 

But don’t cry for GM just yet. This is still one of the most profitable car companies globally, and the latest round of cost cuts will make it more profitable still. The company made $12.8 billion (£10bn) profit in 2017, most of it from North America and most of that from selling pick-up trucks and SUVs. 

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GM’s CEO, Mary Barra, is famously unsentimental when it comes to holding on to markets, brands and car lines that aren’t making money. In the US right now, it’s hard to make a business case for keeping traditional saloons when everyone wants SUVs or pick-ups.

GM is the third largest car company in the US after Ford and Toyota based on 2018 sales, but of the 1.67 million vehicles it sold to the end of October, less than half a million were cars, according to data from Automotive News. Of its mainstream Chevrolet saloons, only the mid-sized Malibu survives the cull. Also gone is the Vauxhall Insignia-based Buick Lacrosse and Cadillac’s flagship saloon, the CT6. 

GM reckons its cost-cutting will save $6bn (£4.7bn) annually and that’s just what shareholders want to hear, even if it has angered US president Donald Trump. 

“The most aggressive car companies are looked upon most favourably by the markets,” Tim Urquhart, principal analyst for IHS Markit, told Autocar. 

One commentator on the Seeking Alpha investor website approvingly described the move as creating a “fortress balance sheet” – building a wall of money to defend itself against the myriad uncertainties facing car companies right now. 

“We are taking these actions now while the company and the economy are strong,” Barra said. It also needs the cash to invest in high-tech, cash-burning ventures such as its Cruise autonomous driving division, its Maven car-share scheme and future electric cars. 

If GM’s actions seem drastic, then just wait for whatever Ford is planning. GM reckons the cost it’ll have to pay to shut down the seven factories, and other restructuring will run to $3bn-$3.8bn (£2.4bn-£3bn). Ford has said its as yet unannounced restructuring will cost up to $11bn (£8.6bn), mostly outside the US. The car world is in upheaval. What looks like capitulation could end up being the cost of survival.

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Comments
9

6 December 2018

At first glance yes it's a big deal but on reflection it's actually surprising that the 3 box saloon lasted so long as a default choice. Once an alternative to a 3 box is offered customers move away from the more impractical saloon. Consider the increasing sales of hatchback 3 series and A5 (sorry 4 door coupes).

The saloon is dying aside from premium inertia sales which will last a little longer.

6 December 2018

You can't just keep cutting lines because you aren't good enough in that market anymore, Saloons today, hatchback tomorrow, SUV's next week etc. And don't start me on FORDS lake of BEV progress.

Certain companies have moved from 3 box to fastbacks, Mazda and Honda for example, which are just a long hatchback. If you just give up eventually you'll just be another Rover!

typos1 - Just can’t respect opinion

6 December 2018
xxxx wrote:

You can't just keep cutting lines because you aren't good enough in that market anymore, Saloons today, hatchback tomorrow, SUV's next week etc. And don't start me on FORDS lake of BEV progress.

Certain companies have moved from 3 box to fastbacks, Mazda and Honda for example, which are just a long hatchback. If you just give up eventually you'll just be another Rover!

What he said!!

6 December 2018
xxxx wrote:

Certain companies have moved from 3 box to fastbacks, Mazda and Honda for example, which are just a long hatchback.

The Mazda 6 is still a saloon, their previous model had a fastback option, and Honda axed the Accord entirely - it hasn't been a fastback since the early 2000s. The de-facto replacement is the Civic saloon.

Be interesting to see how that Civic and the announced Corolla saloons sell. Mazda were surprised at the popularity of the 3 saloon.

I do agree though that fastbacks are the option if the saloon is to survive - Skoda do this well, and Peugeot have replaced the forgettable 508 with a striking looking fastback.

6 December 2018

When Mr Trump took office he was going to return Detroit to it's former glory days. GM announced the closure of factories, seems I rightly predicted that'd wouldn't go down well with The Donald.

I actually thought Trump would quietly foret his promises now that he's elected but true to form, he drops another clanger and says if US factories close then he'll withdraw subsidies  -  WTF !   As ever his first reaction is bully tactics, failing to recognise that withdrawing any subsidy / grant / incentive can only make GM's situation worse and lead to further closures.

GM abandoning global markets isn't a surprise because it's history been littered with lack of investment and some very weird management decisions. And whilst it's true their home market want SUV's ( GM top the sales chart with their SUV), the top selling cars in the USA still include 4dr Honda Civic, Toyota Camry and Corolla, Nissan Sentra etc.  So what makes the Asian's different to GM?  Well those cars are global sellers...  GM on the otherhand took Mrs May's Brexit approach - try to please everyone and end up pleasing no one. It's a strategy that was always going to cost more.

I'm not a fan of GM products, but I think they're strategy is sensible - almost like going back to first principals and starting again. Besides, anyone who sticks two fingers up at Trump is good with me.

6 December 2018

More wonky Autocar statistics.

 

To the end of September 2018 (not October), GM sold 2168808 vehicles in the USA.

 

I would love to know where the 1.67m to the end of October came from?

6 December 2018

The market is moving to rugged go-anywhere looking vehicles, people want to sit up high. In a way this is a return to the upright big wheeled cars of the early 20th century.

Nissan Europe blazed the trail away in the mid 2000s, axing the Primera and Almera and controvertially replacing them with the Qashqai and Juke, the former is a regular top 10 seller in the UK.

6 December 2018

Are they being affected by Brexit, or climate change - or is it Brexit?  It must be one of them as both seem to be able to cause devastation, apparently.

I say my bit, then go. So although I'm interested in what you may initially say, I don't care what you think about what I've written, so I won't read whatever your reply is.

7 December 2018

Has someone  confused  GM  with its brand Chevrolet,  to make it only 3rd in the US sales volume.?

As well the  Buick Lacrosse is based on the  Chev Impala/Cadillac CT6 platform, so makes sense they are  discontinued together.  The Insignia based model is the Buick Regal- which is a direct import as liftback and  wagon versions. 

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