It’s Monday, and L.A. Auto Show media-preview week. The news has already begun, with General Motors this morning confirming major production moves and staff reductions, with multiple plant closings impacting upwards of 6,000 workers. Salary workforce reductions in the 15 percent range are also underway as G.M. looks to save nearly $5 billion a year in costs.
A General Motors press release confirming the actions can be found here: https://investor.gm.com/news-releases/news-release-details/general-motors-accelerates-transformation
Commentary from Cox Automotive experts and analysts can be found below. If you would like to speak to anyone from the Cox Automotive team, feel free to contact us.
Jonathan Smoke, chief economist, Cox Automotive
GM’s moves are appropriate for this phase of the cycle where new-vehicle sales are challenged by payment affordability due to higher interest rates as well as higher vehicle costs. The reduction in production and employment will also impact the local economies, starting a negative cycle that will also lead to reduced economic growth and demand. Historically big-ticket purchase items like homes and autos usually decline in sales before a recession begins. The era of historically low interest rates driving record sales is officially over.
Michelle Krebs, executive analyst, Autotrader
In contrast to times past, General Motors, under CEO Mary Barra, is trying to get ahead of a potential crisis by making cuts now. A confluence of factors has triggered GM’s actions: a downturn in the important China market as well as a potential downturn in the North American market – the two are GM’s biggest markets; the dramatic shift by consumers from traditional cars to utility vehicles; and the impact of tariffs and trade issues.
GM is actually a tad late to adjusting its product line and production capacity to the dramatic car to utility shift. Ford and Fiat Chrysler already revealed their plans to largely abandon traditional cars. We had expected GM to follow suit, especially in light of 2019’s labor talks with the UAW.
Rebecca Lindland, executive analyst, Kelley Blue Book
Mary Barra is pushing GM into the 21st century by proactively up-ending nearly every part of the U.S. business and its global operations, positioning the company to be more flexible, agile and streamlined. But it comes at a tremendous cost to people and the communities which depend upon GM plants for economic sustainability. While this may be a market necessity, I am concerned about the brain drain: a loss of valuable legacy knowledge and experience as long-term GM employees are let go.
Karl Brauer, executive publisher, Autotrader and Kelley Blue Book
For several years everyone has been talking about the impending upheaval facing the auto industry. Today we got our first major preview of how this upheaval will manifest. As General Motors’ CEO Mary Barra has always moved quickly to address the company’s challenges, and today’s announcements remain true to that leadership style. She’s moving GM toward advanced technology and away from fading models the market has largely abandoned. Each of these moves will contribute to GM’s long-term financial and competitive health, though they take a heavy toll on much of the current workforce.