GM Details Transformation Into New Car(?) Company
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DETROIT - November 26, 2018: General Motors this morning confirming major production moves and staff reductions, with multiple plant closings impacting upwards of 6,000 workers. Salary workforce reductions in the 15 percent range are also underway as G.M. looks to save nearly $5 billion a year in costs.
A General Motors press release confirming the actions can be found below:
Commentary from Cox Automotive "Experts".
Michelle Krebs, executive analyst, Autotrader
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; the dramatic shift by consumers from traditional cars to utility vehicles; and the impact of tariffs and trade issues.
GM is actually a tad late to adjusting its product line and production capacity to the dramatic car to utility shift. Ford and Fiat Chrysler already revealed their plans to largely abandon traditional cars. We had expected GM to follow suit, especially in light of 2019’s labor talks with the UAW.
Rebecca Lindland, executive analyst, Kelley Blue Book
Mary Barra is pushing GM into the 21st century by proactively up-ending nearly every part of the U.S. business and its global operations, positioning the company to be more flexible agile, and streamlined. But it comes at a tremendous cost to people and the communities which depend upon GM plants for economic sustainability. While this may be a market necessity, I am concerned about the brain drain: a loss of valuable legacy knowledge and experience as long- term GM employees are let go.
Karl Brauer, executive publisher, Autotrader and Kelley Blue Book
For several years everyone has been talking about the impending upheaval facing the auto industry. Today we got our first major preview of how this upheaval will manifest. As General Motors’ CEO Mary Barra has always moved quickly to address the company’s challenges, and today’s announcements remain true to that leadership style. She’s 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.
Official General Motors Transformation Plan
Mon, November 26, 2018
- Transforming the global enterprise to advance the company's vision of Zero Crashes, Zero Emissions, Zero Congestion
- Taking cost actions and optimizing capital expenditures to drive annual run-rate cash savings of approximately $6 billion by year-end 2020
DETROIT – General Motors will accelerate its transformation for the future, building on the comprehensive strategy it laid out in 2015 to strengthen its core business, capitalize on the future of personal mobility and drive significant cost efficiencies.
Today, GM is continuing to take proactive steps to improve overall business performance including the reorganization of its global product development staffs, the realignment of its manufacturing capacity and a reduction of salaried workforce. These actions are expected to increase annual adjusted automotive free cash flow by $6 billion by year-end 2020 on a run-rate basis.
"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," said GM Chairman and CEO Mary Barra. "We recognize the need to stay in front of changing market conditions and customer preferences to position our company for long-term success."
Contributing to the cash savings of approximately $6 billion are cost reductions of $4.5 billion and a lower capital expenditure annual run rate of almost $1.5 billion. The actions include:
- Transforming product development – GM is evolving its global product development workforce and processes to drive world-class levels of engineering in advanced technologies, and to improve quality and speed to market. Resources allocated to electric and autonomous vehicle programs will double in the next two years. Additional actions include:
- Increasing high-quality component sharing across the portfolio, especially those not visible and perceptible to customers.
- Expanding the use of virtual tools to lower development time and costs.
- Integrating its vehicle and propulsion engineering teams.
- Compressing its global product development campuses.
- Optimizing product portfolio – GM has recently invested in newer, highly efficient vehicle architectures, especially in trucks, crossovers and SUVs. GM now intends to prioritize future vehicle investments in its next-generation battery-electric architectures. As the current vehicle portfolio is optimized, it is expected that more than 75 percent of GM's global sales volume will come from five vehicle architectures by early next decade.
- Increasing capacity utilization – In the past four years, GM has refocused capital and resources to support the growth of its crossovers, SUVs and trucks, adding shifts and investing $6.6 billion in U.S. plants that have created or maintained 17,600 jobs. With changing customer preferences in the U.S. and in response to market-related volume declines in cars, future products will be allocated to fewer plants next year.
Assembly plants that will be unallocated in 2019 include:
- Oshawa Assembly in Oshawa, Ontario, Canada.
- Detroit-Hamtramck Assembly in Detroit.
- Lordstown Assembly in Warren, Ohio.
Propulsion plants that will be unallocated in 2019 include:
- Baltimore Operations in White Marsh, Maryland.
- Warren Transmission Operations in Warren, Michigan.
In addition to the previously announced closure of the assembly plant in Gunsan, Korea, GM will cease the operations of two additional plants outside North America by the end of 2019.
These manufacturing actions are expected to significantly increase capacity utilization. To further enhance business performance, GM will continue working to improve other manufacturing costs, productivity and the competitiveness of wages and benefits.
- Staffing transformation – The company is transforming its global workforce to ensure it has the right skill sets for today and the future, while driving efficiencies through the utilization of best-in-class tools. Actions are being taken to reduce salaried and salaried contract staff by 15 percent, which includes 25 percent fewer executives to streamline decision making.
Barra added, "These actions will increase the long-term profit and cash generation potential of the company and improve resilience through the cycle."
GM expects to fund the restructuring costs through a new credit facility that will further improve the company's strong liquidity position and enhance its financial flexibility.
GM expects to record pre-tax charges of $3.0 billion to $3.8 billion related to these actions, including up to $1.8 billion of non-cash accelerated asset write-downs and pension charges, and up to $2.0 billion of employee-related and other cash-based expenses. The majority of these charges will be considered special for EBIT-adjusted, EPS diluted-adjusted and adjusted automotive free cash flow purposes. The majority of these charges will be incurred in the fourth quarter of 2018 and first quarter of 2019, with some additional costs incurred through the remainder of 2019.
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General Motors is committed to delivering safer, better and more sustainable ways for people to get around. General Motors, its subsidiaries and its joint venture entities sell vehicles under the Cadillac, Chevrolet, Baojun, Buick, GMC, Holden, Jiefang and Wuling brands. More information on the company and its subsidiaries, including OnStar, a global leader in vehicle safety and security services, Maven, its personal mobility brand, and Cruise, its autonomous vehicle ride-sharing company, can be found at http://www.gm.com.
