GM Makes It Official: 5 North American Plants, 6,300 Jobs Are Gone

In the name of “transforming the global enterprise,” General Motors Co. (NYSE: GM) announced Monday morning that it plans not to allocate any products to five assembly plants and two propulsion plants next year, to cut its salaried staff by 15% and to take pretax charges of $3.0 billion to $3.8 billion related to the changes. Shares popped nearly 7% following the announcement.

Not allocating products does not necessarily mean that the plans will close, but it does put in jeopardy the jobs of about 6,300 hourly and salaried staff at three North American plants ahead of contract negotiations in 2019 with the United Auto Workers Union and in 2020 with Canadian autoworkers union Unifor.

With no current plans to build vehicles beyond 2019, the announcement is tantamount to shutting the plants down. It is possible that union negotiations could breathe life back into one or more of the plants, but likely only with significant concessions from GM’s unions.

The announcement confirms Sunday reports that GM would halt allocations at its Oshawa, Ontario, assembly plant. Other affected assembly plants are the Detroit-Hamtramck, Michigan, and Lordstown, Ohio, plants, along with two unnamed plants outside North America. All products being assembled at these plants are not expected to be produced by the end of next year.

The Baltimore operations plant and the Warren, Michigan, transmission operations plant also will not receive any allocations in 2019.

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CEO Mary Barra said:

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.

GM also will reduce its salaried and salaried contract staff by 15%, including 25% fewer executives, in a move designed to “streamline” decision making.

The company’s actions are said to be “in response to market-related volume declines in cars.” The changes are expected “to significantly increase capacity utilization,” according to GM’s announcement.

The Oshawa plant currently builds low-volume Cadillac XTS and Chevy Impala passenger cars, along with Chevy Silverado and GMC Sierra pickups. Detroit-Hamtramck builds Chevy Volt, Impala, Cadillac CT6 and Buick LaCrosse vehicles. Lordstown produces the Chevy Cruze exclusively. Aside from the two pickups, none of these vehicles is a big seller for GM.

GM said it expects to record up to $1.8 billion in non-cash accelerated asset write-downs and pension charges and up to $2 billion in employee-based and other cash expenses related to the changes. The majority of the charges will be allocated in the fourth quarter and in the first quarter of 2019.

GM shares traded up about 6% in the late morning, at $38.03 in a 52-week range of $30.56 to $45.52.

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