General Motors announced a major restructuring of its global business, shutting production at five facilities in North America and slashing its staff. GM said it will reduce its salaried workforce by 15%, including a quarter of the company's executives.
The moves are the first big steps in the century-old GM's transformation. It is closing facilities and reinvesting money away from cars that once dominated roadways and to technology that the company believes will power its future.
GM's (GM) new motto is "Zero Crashes, Zero Emissions, Zero Congestion," signaling a shift to self-driving, electric vehicles. But the restructuring is also about making cars people want now. Customers are increasingly shunning sedans in favor of SUVs and hatchbacks.
The company also said the plan would make the company more efficient, saving it $6 billion a year by the end of 2020. GM said its slimmed down production plan would allow it to share technology across all of its vehicles, reducing the amount of time and labor it takes to build cars.
"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 CEO Mary Barra, in a statement. "We recognize the need to stay in front of changing market conditions and customer preferences to position our company for long-term success."
GM said it would shut down operations at plants in Detroit; Oshawa, Ontario; Warren, Ohio; White Marsh, Maryland; and Warren, Michigan. The plants made sedans that have waned in popularity, including the Chevrolet Volt, Impala and Cruise, the Buick LaCrosse, and the Cadillac CT6 and XTS. Two of the plants made engines and parts for those cars. The facilities made some trucks, but those trucks are also made at in Mexico.
The company is battling rival automakers to be first in line to mass produce the cars of the future. But the automaking leader of the future may not be GM or one of its traditional rivals. Alphabet (GOOGL), Apple (AAPL), Uber and Tesla (TSLA) are leading Silicon Valley's push into the self-driving cars. That's why GM bought Cruise, a separate company with big backing from SoftBank and Honda. GM expects to spend $1 billion on Cruise this year to build the car of the future.
GM is also dealing with some higher costs associated with tariffs on imported steel and aluminum, which has raised its commodity costs by about $300 million in the third quarter, and could raise costs by $1 billion next year. There is also a threat that costs of auto parts could rise if the Trump administration goes ahead with plans it is weighing to put tariffs on imported vehicles and parts.
Canadian Prime Minister Justin Trudeau said he was "deeply disappointed" by the decision to shut the Oshawa, Ontario plant. "GM workers have been part of the heart and soul of Oshawa for generations - and we'll do everything we can to help the families affected by this news get back on their feet."
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