General Motors is planning a major shift toward the development of electric vehicles. The new plan involves shuttering five North American plants, and a major workforce reduction.
A few weeks back, General Motors announced a plan to offer 18,000 salaried employees a buyout. These employees are not just those close to retirement, but rather, many who are in their thirties and forties. These are folks who are in the prime of their professional careers. GM’s offer came with a catch. If the company did not get enough volunteers to meet its goal, it would begin layoffs. Take note that these are not union employees, so these folks won’t be protected by picket lines and walkouts. At the time of this announced workforce reduction, GM offered a clue as to why it would be cutting so deeply into its brain trust. GM Spokesman Pat Morrissey said about the worker buyouts or layoffs, “We always have the need to acquire new talent. We’re trying to address ongoing efforts to reduce costs but continue our efforts in working on the future of mobility. We’ll continue to recruit in select areas of the business.”
A new, more significant announcement today reveals why those 18,000 employees aren’t really who GM wants. The problem is they are experts on the subject of trucks, SUVs, and cars. More specifically, they are experts on the subject of today’s vehicles with liquid-fuel engines and geared transmissions. Going forward GM isn’t focused on vehicles that use old-fashioned things like engines, steering wheels, and pedals, but rather vehicles with electric motors that propel themselves autonomously. If you’re a 29-year-old expert in writing code for lidar systems, this is your window to join one of America’s oldest manufacturing companies.
GM’s announcement today focuses primarily on two things; Increasing its cash flow and profitability and shifting to autonomous electric vehicles. GM points out that in recent years it has invested heavily in updating its truck and SUV business. Indeed, the Silverado, GM’s top-selling vehicle and North America’s number-two selling vehicle, is all-new for 2019, as is its twin the Sierra pickup from GMC. The Colorado and Canyon midsized trucks are also relatively new and only half-way to their next refresh. GM’s fleet of compact, subcompact, and midsize crossovers is also fresh and doing very well. GM says now intends to turn its attention to its next-generation battery-electric architectures. Looking ahead, GM sees 75 percent of its global sales volume coming from just five vehicle architectures by early next decade.
GM said in a statement today, “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.” Read between the lines, and look at the vehicles made in the plants that GM plans to leave “unallocated” and it is clear that most of its conventional cars are going away. These plants primarily produce the Chevy Cruze and Impala sedans, along with other Buick and Cadillac sedans. In addition to its recently closed Korean plant, GM also says it will close two more facilities located outside North America. GM has not mentioned how it will deal with the unions who have contracts and promises beyond 2019. Unifor, the union that represents hourly workers in the Oshawa plant, issued a statement of its own, saying, “Based on commitments made during 2016 contract negotiations, Unifor does not accept this announcement and is immediately calling on GM to live up to the spirit of that agreement.”
GM’s announcement today echoed its earlier statement regarding its workforce, saying, “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.” GM isn’t kidding around. It plans to allocate “$1.8 billion of non-cash accelerated asset write-downs and pension charges,” and as much as $2.0 billion in cash to its employee buyouts. All of this will reduce GM’s taxable income dramatically at a time when it is rolling in profits. Looking ahead, GM says that the moves it is making will save the company $6 billion. GM Chairman and CEO Mary Barra summed up the big picture plan in a statement, saying, “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. We recognize the need to stay in front of changing market conditions and customer preferences to position our company for long-term success.”