General Motors announced plans to close three assembly plants, on each in Michigan, Ohio and Ontario before the end of 2019.
Mary Barra, CEO of General Motors Co., sent a shock through the auto industry and U.S. and Canadian economies Monday with her announced plans to dramatically reduce car production in the U.S. in 2019.
Here are some of the highlights based on what we know in the early hours after the announcement:
General Motors Co. announced plans to close the Detroit-Hamtramck Assembly Plant and Warren Transmission Operations in metro Detroit. GM will also close the Oshawa Assembly Plant in Oshawa, Ontario; Lordstown Assembly in Lordstown, Ohio and the Baltimore Operations in White Marsh, Maryland.
How many people are affected?
About 14,200 employees in North America; 8,000 white-collar jobs and about 6,200 factory worker jobs.
But more people than that will be affected. For every auto assembly job, there are up to seven spin-off jobs so the impact is about 49,000 in North America, industry analysts estimate.
What does this mean for jobs?
Under their UAW contract, factory workers have the option to be relocated if jobs are available, in order of seniority.
What cars are being eliminated?
Chevrolet Volt, Chevrolet Impala, Chevrolet Cruze, Cadillac CT6, Buick LaCrosse. Consumers are buying more SUVs and trucks, but fewer cars.
Are tariffs to blame?
Analysts say tariffs on steel and aluminum in President Donald Trump’s trade war are a headwind for automakers, but not the central reason for GM’s move.
“I believe that GM did a full review of the market side of their future products needs and compared that to their manufacturing footprint and strategically concluded that these were all of the plants they no longer needed,” said market analyst Jon Gabrielsen.
“This is a correction,” said Kristin Dziczek, vice president of Industry, Labor & Economics at the Center for Automotive Research in Ann Arbor. “GM plants are building more cars that people just don’t want to buy. This has very little to do with tariffs, though I’m sure that’s a part. But this is about the fundamentals of the business.”
What’s the time frame?
In Hamtramck, production of the Lacrosse and Volt will end March 1. Cruze production ends March 1. The Cadillac CT6 and Chevrolet Impala end production June 1.
The legal wording
Why the unusual language used to announce the downsizing? Automakers have 2015 contracts with factory workers that does not allow the company to “close” or “idle” plants. Workers agree to wages based on these four-year contracts. Therefore, this plan is about “not allocating product” rather than closure.
GM is building popular products including the Terrain, Equinox in Mexico, where it also plans to build the new Blazer, and builds the Envision to China to increase the profit margin based on lower wages and benefits. Thus, the U.S. plants are not being fully utilized as vehicle demand levels off after 2016’s peak. Also, GM is focusing resources on robot vehicle technology and electrification.
What does this mean for GM stock?
GM’s stock price went up 5 percent.
Analysts said Wall Street is rarely sad when people lose jobs because that means corporate profits grow. Reviews praised the business move:
- “In contrast to times past, General Motors, under CEO Mary Barra, is trying to get ahead of a potential crisis by making cuts now. A confluence of factors has triggered GM’s actions: a downturn in the important China market as well as a potential downturn in the North American market — the two are GM’s biggest markets … GM is actually a tad late to adjusting its product line and production capacity to the dramatic car to utility shift,” said Michelle Krebs, executive analyst, Autotrader.
- “(Mary Barra is) moving GM toward advanced technology and away from fading models the market has largely abandoned. Each of these moves will contribute to GM’s long-term financial and competitive health, though they take a heavy toll on much of the current workforce,” said Karl Brauer, executive publisher, Autotrader and Kelley Blue Book.
Factory workers watch and wait
Autoworkers in the U.S. and Canada point to concessions made during the Great Recession and expressed anger about production in Mexico and a focus on Wall Street after workers sacrificed.
Contact Phoebe Wall Howard: 313-222-6512 or firstname.lastname@example.org. Follow her on Twitter @phoebesaid
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