General Motors Plans Big Restructuring Exercise: To Shut A Few Plants, Layoff Staff, In Shift Towards Electric Vehicles

General Motors headquarters in Detroit, Michigan (Bill Pugliano/Getty Images)

Automotive behemoth General Motors (GM) announced on Monday that it would undertake a major restructuring exercise aimed to “accelerate its transformation” toward electric and autonomous vehicles” and achieve an estimated $6 billion reduction in costs by 2020.

The company will be shuttering up to five plants in the US and Canada and slashing 15 per cent of its salaried workforce, a total of 14,700 jobs.

The decision came in the face of a slow selling market for traditional gas-powered sedans and part of the company ‘s strategy to shift more investment towards electric and autonomous vehicles.

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GM will halt its production by 2019 at three assembly plants – Lordstown, Ohio; Hamtramck, Michigan; and Oshawa, Ontario. The company also plans to stop building several models now assembled at those plants, including the Chevrolet Cruze, the Cadillac CT6 and the Buick LaCrosse. The Cruze compact car will be discontinued in the US market in 2019.

Plants in Baltimore, Maryland, and Warren, Michigan, that assemble power train components will have no products assigned to them after 2019 and thus are at risk of closure, the company said. It will also close two factories outside North America, but did not identify them.

GM chairman and CEO Mary Barra said that the cutbacks are a response to dwindling car sales in domestic and international markets (sedan sales have floundered while pickup truck sales remain robust) and the impact of Trump's trade war. The steel tariffs alone have already cost GM some $1 billion this year, the company said.

“We are taking this action now while the company and the economy are strong to keep ahead of changing market conditions," Barra said during a conference call with reporters.

In a press release, GM said that it has recently invested in newer, highly-efficient vehicle architectures, especially in trucks, crossovers and SUVs and will prioritise future vehicle investments in its next-generation battery-electric architectures. After the current vehicle portfolio is optimized, the company expects that more than 75 per cent of GM's global sales volume will come from five vehicle architectures by early next decade.

US President Trump told The Wall Street Journal in an interview that he spoke with Barra on Sunday night to discuss the downsizing plan. He told her that GM should stop making cars in China and open a new plant in Ohio to replace the ones being closed.

“They better damn well open a new plant there very quickly," Trump told the Journal. "I love Ohio," Trump said. "I told them, you're playing around with the wrong person,'" he added, according to the newspaper.

Canadian Prime Minister Justin Trudeau too has expressed "deep disappointment" at GM's decision to close its plant in Oshawa, Ontario. He reportedly spoke with Barra over the weekend.

The company also faces stiff opposition from the union representing workers. The union at General Motors assembly plant in Oshawa is promising "one hell of a fight" after the automaker announced it would close the location along with four other facilities in the US as part of a global reorganization.

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