Detroit-based US automaker General Motors has announced that it plans to close five plants in the United States and Canada, as well as eliminate 15% of its salaried workforce. The move is a part of a larger cost-cutting plan aimed at restructuring its production away from passenger cars and toward SUVs and trucks. Demand has died off for many of the passenger cars in the GM fleet, with consumers flocking to new SUVs and trucks. The increased fuel economy of the SUV and truck fleet, as well as relatively low gas prices, has no doubt contributed to this trend in consumer demand.
GM plans to close its Lordstown production facility in northeast Ohio, its Detroit-Hamtramck assembly plant, a plant in Ontario, Canada, its Baltimore operations plant in Maryland, and its Warren Transmission Operations plant in Michigan. All the five plants set to close make passenger cars. Among the passenger cars on GM’s chopping block are the Chevy Cruze and Volt (in North America), the Buick LaCrosse, Cadillac XTS, Cadillac CT6, and the Chevy Impala.
GM has also announced that about half the employees at these plants will be given the opportunity to relocate to another company operation, but the rest of the jobs will be lost as GM CEO Mary Barra seeks to restructure the company to succeed in a future market of self-driving cars, ride sharing, and emissionless vehicles. Nonetheless, President Trump excoriated GM for the move, telling the press, “This country has done a lot for General Motors,” and, “They better get back to Ohio and soon … we have a lot of pressure on them.”
President Trump went on to criticize GM’s CEO, tweeting that he was “Very disappointed with General Motors and their CEO, Mary Barra, for closing plants in Ohio, Michigan and Maryland,” and that because of the closures his administration was “looking at cutting all @GM subsidies, including for electric cars.” The subsidies President Trump was referring to most likely include the tax credit provided to automakers by the federal government for each electric car sold, up to 200,000 units. This subsidy is nothing unique to GM, and is provided to Tesla, Ford, and other domestic car manufacturers.
Finally, it is worth noting that General Motors did not come to this decision in a vacuum. Government policy no doubt had a part to play, alongside market trends. For instance, no doubt contributing to GM’s move are the president’s steel and aluminum tariffs. If passenger cars are experiencing shrinking demand at the same time that primary materials used in their construction increase in price by 15%-25%, the need to restructure production away from the low-demand vehicles will be accelerated.
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