GM closing Lordstown assembly plant, cutting 14,700 jobs in North America

27 November, 2018, 07:16 | Author: Teresa Adams
  • GM to slash 14,700 jobs in North America

The announcement is the biggest North America restructuring for the U.S. No. 1 carmaker since its bankruptcy a decade ago.

GM jumped as much as 7.9 percent to US$38.75, the highest since July, as of 12:20 NY trading.

GM will shutter at least three production plants, Oshawa Assembly in Canada, Lordstown Assembly in OH, and Detroit-Hamtramck Assembly in MI.

GM also said that the company will jettison the Buick LaCrosse, Chevrolet Impala and Cadillac CT6 sedans next year.

GM isn't the first to abandon much of its vehicle market. The company said it will also close two unidentified factories outside North America. Ford said in April it planned to stop building almost all cars in North America. GM Chief Executive Officer Mary Barra is trying to make the company leaner as USA auto demand slides from a record in 2016 and sales in China - GM's other profit center - are also in a slump.

CEO Mary Barra is seeking to reposition GM for a future defined by self-driving cars, ride-sharing networks and electric vehicles.

While GM is buying out and laying off workers in its core auto operations, the automaker has added close to 1,000 people in the past year at Cruise.

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General Motors rallied as much as 8% Monday after announcing plans to stop producing vehicles at three factories in North America and to cut its salaried employees by 15% next year.

In Canada, Prime Minster Justin Trudeau expressed "deep disappointment" with the plant closure.

The company says the moves it is making are expected to create an annual cash savings of $6 billion by the end of 2020.

"Actions are being taken to reduce salaried and salaried contract staff by 15 percent, which includes 25 percent fewer executives to streamline decision making", GM said.

About 6,000 factory workers could lose jobs in the USA and Canada, although some could transfer to truck plants.

Shares of GM, the largest automaker in the US which sells the Chevrolet, Buick, Cadillac and GMC brands, rose almost 6 percent on the news to $37.93 in midday trading Monday.

It comes as the auto giant restructures to cut costs and focus more on electric and autonomous vehicles.

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Sales for all GM cars and trucks declined 11 percent year over year, with the company blaming the impact of hurricanes.

Rep. Tim Ryan, Ohio Democrat, called for hearings to review how GM used millions of dollars in tax cuts from the corporate tax relief enacted by Mr. Trump and congressional Republicans past year.

Cost pressures on GM and other automakers and suppliers have increased as demand waned for traditional sedans. That includes $4 billion in cost cuts and $1.5 billion in reduced capital expenditures.

GM shares were trading around $37.78 as of 3:35 ET on Monday. As many as 10,000 jobs are tied to companies that supply parts for the plant, said Flavio Volpe, head of the Automotive Parts Manufacturers Association.

Let's start in the U.S. If GM wants to close those OH and MI plants, it can't just lock the doors tomorrow and throw the keys away. Consultancy LMC estimates that Lordstown operates at just 31 percent of production capacity in 2018. "We will achieve this through a combination of voluntary and involuntary programs", she said.

With U.S. vehicle sales lagging, that means several GM auto plants have fallen to just one shift, including its Hamtramck and Lordstown assembly plants. Ford said in April it planned to stop building almost all cars in North America.

The shift in US consumer preference away from passenger cars in favor of larger, more comfortable SUVs and pickup trucks has been swift and severe, leaving automakers scrambling to readjust.

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