GM Layoff Warning to Car Industry

Cars and Drivers

Published: August 20, 2024 6:40 am

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General Motors Co. (NYSE: GM) layoffs seem benign, except to those people let go.
White-collar layoffs are often a sign that companies can do more with less, but also a sign of trouble.
Also: Dividend legends to hold forever.

The General Motors Co. (NYSE: GM) layoffs seem benign, except to those people let go. These were white-collar workers, many of whom worked in software development, not people from the factory floor. GM and Ford Motor Co. (NYSE: F) said that, after their deals with the UAW, they would need to cut costs. In addition, the firings look like the management of GM believes it can run more efficiently.

According to CNBC, a GM spokesperson said in an emailed statement “As we build GM’s future, we must simplify for speed and excellence, make bold choices, and prioritize the investments that will have the greatest impact.” The statement means close to nothing.

Facing Reality

The car industry faces realities. The first is that the tens of billions of dollars paid to enter the electric vehicle (EV) business will not pay off, perhaps for years. Ford sells a few thousand EVs a month and still calls itself the number two EV company in the United States after Tesla Inc. (NASDAQ; TSLA). Nevertheless, earnings are undermined by losses in these EV operations.

GM and Ford cannot overcome the fact that EV sales are largely out of their control. The entire industry has slowed, and even Tesla’s sales have faltered. Consumers continue to worry about driving range, lack of chargers, and expensive EV prices.

The second reality is that the UAW has hurt the companies badly on the bottom line. Ford says the contract will cost it over $8 billion over its duration. Those are fixed costs that it cannot steer around.

White-collar layoffs are often a sign that companies can do more with less. They are also a sign of trouble.

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