General Motors announced this morning that it will close five factories by the end of next year, four in the U.S. and one in Canada, and lay off 15% of its salaried staff—including 25% of its executives, “to streamline decision making.”
GM said in a statement that the move is part of its 2015 strategy “to strengthen its core business, capitalize on the future of personal mobility and drive significant cost-efficiencies.” The closures will increase capacity utilization in the plants that remain and emphasize crossovers, SUVs and light trucks over sedans.
The plant closures and layoffs are expect to cut costs by $6 billion, the company said.
“The actions we are taking today continue our transformation to be highly agile, resilient and profitable, while giving us the flexibility to invest in the future,” GM Chairman and CEO Mary Barra said in the statement. “We recognize the need to stay in front of changing market conditions and customer preferences to position our company for long-term success.”
GM actually showed strong third-quarter 2018 earnings, with profitability in all of its core operating segments. Sales of full-size trucks and crossovers drove the North American market.
Assembly plants that will close in 2019 include:
- Oshawa Assembly in Oshawa, Ontario, Canada (2,600 hourly employees, 300 salaried)
- Detroit-Hamtramck Assembly in Detroit (1,348 hourly employees, 194 salaried)
- Lordstown Assembly in Warren, Ohio. (1,435 hourly employees, 183 salaried)
Propulsion plants that will close in 2019 include:
- Baltimore Operations in White Marsh, Maryland. (253 hourly employees, 57 salaried)
- Warren Transmission Operations in Warren, Michigan. (265 hourly employees, 70 salaried)
GM, which has invested heavily in an electric vehicle platform and in mobility, said it will “prioritize future vehicle investments in its next-generation battery-electric architectures, especially in trucks, crossovers and SUVs.”
Gary Silberg, national sector lead partner for the automotive industry for KPMG professional services firm, said although the economy has been strong, car sales have stalled and the automotive industry sees a shift in consumer preferences that needs to be addressed.
“Unemployment is incredibly low, consumer confidence is incredibly high, interest rates are historically relatively low, we’re living in economically great times, and yet car sales have peaked and that doesn’t make sense,” he said. “Under those historical conditions, car sales should continue to go very nicely and they’re not. I think there’s an understanding in the macroindustry that we may have peaked and there’s these underlying trends of mobility as a service. Different economic models are disrupting the industry and people are preparing for it. And I don’t think [GM] is going to be the only one.”
The Detroit-Hamtramck plant scheduled for closure increased its workforce by 1,200 in 2015 and added a second shift. It manufactured the Chevrolet Impala and the plug-in hybrid Volt, models that are scheduled to be discontinued.
Courtney Zemke, spokeswoman for the Detroit-Hamtramck plant, said at the time that workers at that plant had a standardized process and switched up their work depending on which vehicle is coming down the line. "It could be a Volt, or an Impala or an ELR--you don't get a whole group [of one model] at the same time," she said.
Resources allocated to electric and autonomous vehicle programs will double in the next two years, GM said.
Plans also call for increasing the sharing of high-quality components across is vehicle portfolio; expanding the use of virtual tools to speed up development time and costs; integrating GM’s vehicle and propulsion engineering teams; and consolidating its global product development campuses. GM has global product development campuses in Pontiac, Milford and Warren, Mich., as well as several regional centers in Brazil, Korea and India that are more localized in their product development.
The company also said it expects that by the early 2020s, more than 75% of its global sales will come from five vehicle architectures. In 2015, GM had 14 core and 12 regional architectures.
GM also said in the statement that it will close two additional plants outside North America by the end of 2019.
The company’s stock price was up 5% in mid-morning trading after today’s announcement.