GM announces big cuts to workforce and plant closings

GM announced on Monday they plan to slash salaried staff by 15% and close five facilities in North America, including three plants in Michigan, Ohio and Maryland.

Posted: Nov 27, 2018 10:56 AM
Updated: Nov 27, 2018 10:58 AM

President Donald Trump has long promised to boost the US auto industry and bring manufacturing jobs back home.

That quest hit a major pothole Monday when General Motors announced it would slash its workforce and shut production at five North American facilities in Ohio, Michigan, Maryland and Ontario, Canada.

Some 8,000 salaried employees and 6,000 hourly workers will either lose their jobs or be reassigned to other plants, and more layoffs are likely on the horizon, industry experts said.

GM's move marks the first rounds of US plant closings since 2010, though the automaker has eliminated shifts and laid off workers at some US plants since early 2017 -- including at the Lordstown, Ohio, and Hamtramck, Michigan, plants now slated to be closed.

The retrenchment follows Ford's announcement last month of a reorganization of its global salaried workforce. The company did not say how many jobs would be eliminated or when the downsizing would take place. It is part of a broader plan to trim costs.

The moves undercut Trump's repeated claims about the positive effects of his economic policies -- including tariffs and massive corporate tax cuts -- on American industry and test his ability to stand against the tide of fundamental forces reshaping the economy.

Trump openly chastised GM CEO Mary Barra on Monday, saying that he'd been "very tough" when they spoke about the closures.

"I spoke to her and I expressed the fact that I am not happy with what she did. You know, the United States saved General Motors, and for her to take that company out of Ohio is not good," he told reporters on the South Lawn as he left for two campaign stops in Mississippi.

A White House official said Barra was still at the White House for a previously scheduled meeting with economic adviser Larry Kudlow as Trump spoke.

Throughout his 2016 campaign, the President repeatedly vowed to revive America's manufacturing sector, particularly the auto industry. He lashed out at automakers for shuttering plants and sending jobs to Mexico, calling out GM in particular shortly before taking office. He promised to renegotiate NAFTA to stem the flow of jobs south of the border.

Early on, the big three US automakers announced large investments in their domestic operations, though several were part of deals negotiated a few years before. Ford canceled plans to build a new plant in Mexico, investing $700 million and creating 700 jobs in Michigan instead. Fiat Chrysler Automobiles said it would pour $1 billion into expanding factories in Ohio and Michigan, creating 2,000 jobs. GM announced it would invest an additional $1 billion, which would create or retain 1,500 jobs.

Toyota and Mazda earlier this year unveiled a plan to jointly build a $1.6 billion plant in Huntsville, Alabama that will employ 4,000 workers.

Employment at motor vehicle and parts manufacturers has nudged up only 1.4%, or 13,000 jobs, during Trump's time in office. That follows years of strong hiring in the aftermath of the 2009 bankruptcies and bailouts of GM and Chrysler. The sector added nearly 300,000 jobs under President Barack Obama.

The auto industry has had to contend with a slowdown in business in recent years. Sales set a record of 17.6 million cars and trucks in 2016, but have drifted downward since.

"We don't need more car plants in the US," said Michelle Krebs, executive analyst at Autotrader. "We already have enough factories to produce the vehicles that they need to make. When you don't have sales going up, you don't need to build more vehicles."

Slower sales, combined with a shift away from sedans and towards SUVs and an increased interest in electric vehicles and self-driving cars, has forced the sector to revamp its operations.

"We will see more layoffs, probably from Ford, even while they expand job listings to more technology-advanced positions. Again, this is about investing in future technology and sadly older (and expensive) workers tend to get caught up in the changing tide," said Rebecca Lindland, a senior analyst with Cox Automotive. "This has been going on for years and is not specific to the auto sector or during the Trump administration, although his policies on tariffs certainly have not helped."

While GM did not mention trade in its announcement, Trump's aggressive protectionist policies are also weighing on US automakers.

They've already been hurt by Trump's tariffs on steel and aluminum imports, and they're bracing for the possibility of new duties on foreign-made vehicles and auto parts. For now the auto tariffs are only under consideration while the administration investigates their potential impact.

If Trump follows through with the threat, GM will be forced to choose between raising prices on consumers or eating the cost. But either way, the tariffs "could still lead to less investment, fewer jobs, and lower wages for our employees," the company said in a comment filed with the Commerce Department.

Trump's duties have invited other countries to impose retaliatory tariffs on US goods, too. After the European Union put tariffs on US-made motorcycles, Harley Davidson said it would shift some production to Europe in order to avoid the taxes. The company said Monday that it is still assessing the impact the move will have on America jobs.

Automakers across the board have faced rising material costs because of the tariffs on steel and aluminum, which went into effect earlier this year.

The duties have driven up the cost of production in the United States by $400 per vehicle, according to the American Automotive Policy Council.

"We think it's made the United States less conducive for investment. We're bearing a cost to produce here that's not experienced in other countries around the world," said Matt Blunt, the president of the association, which represents Fiat Chrysler, Ford and GM.

The tariffs could even wipe out benefits generated by Trump's replacement for the North American Free Trade Agreement, which the president is expected to sign Friday. The new trade pact, known as the United States-Mexico-Canada Agreement, aims to increase auto production inside the three countries.

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