In a big blow to US President Donald Trump’s battle cry of record employment numbers and jobs, iconic Amerian company General Motors (GM), the largest automaker in the U.S which makes Chevrolet, Buick, Cadillac and GMC brands, will lay off nearly 15,000 factory and white-collar workers in North America and put five plants up for possible closure as it moves aggressively to cut costs and focus more on autonomous and electric vehicles in what it admits are tough market conditions.
Jobs in Michigan, Maryland and Ohio in the US and Ontario in Canada are in the crosshairs - most of the US locations are choc-a-bloc with Trump's core base which helped in his 2016 victory. To all those who bought the Trump narrative of how job loss was a Barack-Obama led problem, the GM layoffs will offer a reality check ahead of the 2020 elections. Expect the Trump White House to distract with more extreme moves at the US-Mexico border before it's able to spin this story in a bid to cut losses.
"Don't sell your house, don't go away, jobs are coming back", Trump has long told his raucous political rallies in Ohio. All that talk is ricocheting now, with the shock news coming in today from GM.
In the US, GM has a little more than ~100,000 workers in the US - between hourly wage earners and salaried staff. Most of its closures will come from plants which are making sedans - small cars - that are not selling as well anymore.
Analysts estimate these cuts will improve GM’s free cash flow by $ 6 billion and the markets welcomed the news with a bump in the stock price in early hours of trading Monday. said the moves will save $6 billion in cash by the end of next year, including $4.5 billion in recurring annual cost reductions and a $1.5 billion reduction in capital spending.
In the year ended December 31, 2017, 39% of GM wholesale vehicle sales volume was generated outside the U.S. That the latest wave of job cuts is happening despite Trump's highly touted tax cuts is ominous at least in its stark contrast with Trump's rhetoric and pet imagery of a muscular job market.
Trump in Youngstown, July '17: "Let me tell you folks in Ohio and in this area, don’t sell your house. Do not sell it. We’re going to get those values up. We’re going to get those jobs coming back, and we’re going to fill up those factories" #BrokenPromise https://t.co/DrGIx0Lh1W
— Chris Lu (@ChrisLu44) November 26, 2018
In its SEC filing this year, GM lists domestic manufacturers in lower cost countries exerting major competitive pressures. “China and India, have become competitors in key emerging markets and announced their intention to export their products to established markets as a low cost alternative to established entry-level automobiles. In addition, foreign governments may decide to implement tax and other policies that favor their domestic manufacturers at the expense of international manufacturers, including GM and its joint venture partners. These actions have had, and are expected to continue to have, a significant negative effect on our vehicle pricing, market share and operating results.”
The reduction includes 8,100 white-collar workers, some of whom will take buyouts and others who will be laid off. Most of the affected factories build cars that won't be sold in the U.S. after next year. They could close or they could get different vehicles to build. They will be part of contract talks with the United Auto Workers union next year.
Plants without products include assembly plants in Detroit; Lordstown, Ohio; and Oshawa, Ontario. Also affected are transmission factories in Warren, Michigan, as well as Baltimore. More than 6,000 factory workers could lose jobs in the U.S. and Canada, although some could transfer to truck and SUV plants.
Those cuts are in addition to $6.5 billion that the company has announced by the end of this year.
CEO Mary Barra told reporters that GM doesn't foresee an economic downturn and is making the cuts "to get in front of it while the company is strong and while the economy is strong but reporters on the GM beat are saying this is far from the truth behind the so-called restructuring.
Barra said GM is still hiring people with expertise in software and electric and autonomous vehicles, and many of those who will lose their jobs are now working on conventional cars with internal combustion engines. Barra said the industry is changing rapidly and moving toward electric propulsion, autonomous vehicles and ride-sharing, and GM must adjust with it.
The factories up for possible closure are part of GM's effort "to right-size our capacity for the realities of the marketplace," as consumers shift away from cars to trucks and SUVs.
The company, she said, has invested in newer architectures for trucks and SUVs so it can cut capital spending while still raising investment in autonomous and electric vehicles.
The salaried reductions amount to 15 percent of GM's North American workforce out of 54,000. At the factories, 3,000 workers could lose jobs in Canada and another 3,600 in the U.S. Some U.S. workers would transfer to truck and SUV plants where GM is increasing output, the company said.
GM has offered buyouts to 18,000 retirement-eligible workers with a dozen or more years of service. It would not say how many have accepted the buyouts, but it was short of the company's target because GM said there will be white-collar layoffs.
The company expects to take a pretax charge of $3 billion to $3.8 billion due to the actions, including up to $1.8 billion of asset write downs and pension charges. The charges will take place in the fourth quarter of 2018 and the first quarter of next year.
(With Associated Press)
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Updated Date: Nov 26, 2018 23:50:21 IST