In the small Canadian city called Oshawa, it is often said that local workers have two employment options: the 60-year-old General Motors assembly plant and Oshawa Centre. Now that GM has halted production in this town just outside of Toronto, it looks like the more than 2,500 workers will need to compete for jobs at the 260 businesses operating at the shopping mall.
GM announced that it is slashing production at assembly facilities in Maryland, Michigan, Ohio, and Ontario, as well as two additional facilities outside of North America. The automaker also will end operations at propulsion plants in White Marsh, MD, and Warren, MI. The company will slash its salaried workforce by 15% and reduce the number of executives by 25%.
The company expects as many as 6,000 workers could lose their jobs. But many of these employees could be transferred to its truck and SUV divisions, which have become critical to the company’s growth as consumer demand has shifted from conventional passenger automobiles.
GM Restructures Business
The purpose behind this operations overhaul is to lower carbon emissions and prepare for electric cars and autonomous vehicles. GM plans to hire employees with experience and expertise in software and electric and self-driving cars.
While CEO Mary Barra noted that Trump’s steel and aluminum tariffs hit the company, these levies did not have a significant impact on the restructuring.
Barra said in a statement:
This industry is changing very rapidly when you look at all of the transformative technology — be it propulsion, autonomous driving, connectivity sharing — and we want to make sure we’re well positioned.
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.”
Overall, GM estimates its reorganization will cost up to $3.8 billion, including up to $1.8 billion in asset write-downs and pension charges. These pre-tax costs will come in the fourth quarter of 2018 and the first quarter of 2019. But GM does anticipate savings of approximately $6 billion per year by the end of 2020.
Soon after the news broke, GM shares rose 6% to $38.
Reaction to the News
Ontario Premier Doug Ford said at Queen’s Park during a contentious question period that he has spoken with GM executives, and they confirmed to him that “there’s nothing we can do.” Even with provincial government intervention, Ford said, “the ship has already left the dock.”
Prime Minister Justin Trudeau tweeted that he has expressed to GM management his “deep disappointment in the closure” and will help workers get “back on their feet.” Trump has yet to comment on the decision.
Unifor, the union representing autoworkers in Oshawa, noted that it will be meeting with GM heads. Terry Dites, a vice president of the United Auto Workers, promised to use “every legal, contractual, and collective bargaining avenue” to stop the moves:
This callous decision by GM to reduce or cease operations in American plants, while opening or increasing production in Mexico and China plants for sales to American consumers, is, in its implementation, profoundly damaging to our American workforce.
But former GM Vice Chairman Bob Lutz told CNBC that GM management employed “fast-acting and reality-oriented” measures as the iconic brand faced “a demand problem on cars.”
Auto Market Changing
Political opportunists are already taking advantage of the news. One side decries that it is all about corporate greed and President Trump’s tariffs. The other side blames the prime minister’s carbon tax initiative and red tape. But it is a case of Occam’s Razor: The auto market is drastically changing.
… carmakers are going green.
In addition to surging demand for alternatives to passenger sedans, carmakers are going green and investing in autonomous automobiles. GM did not want to be left behind, so the maker of Buicks and Cadillacs is following suit, aiming to be a power player in these areas. It is not a nefarious plot to stick it to the unions that have bled these companies dry for years.
Markets do not stagnate; they change. If everything had stayed the same since the days of Henry Ford, we would all be driving gas-guzzling Model Ts on our way to the nearest speakeasy to hang out with flappers listening to the tunes of the California Ramblers.