Why Is General Motors Closing So Many Plants?
General Motors is making waves, but not in a good way. The iconic American car company has announced it is closing five of its plants, including plants in Detroit, Warren, and Oshawa.
This development is significant in that nearly 15 percent of the company’s workforce has been laid off. About a quarter of the new executives at GM are also being let so.
Three other plants outside of North America will also be closed down in the future. It is known that one of these plants will be in South Korea, but details on the other two are unclear.
As a result, about 8,000 salaried workers will be out of their jobs. 6,000 hourly workers are also losing their jobs, although some are reassigning to work at different GM plants. The move comes about a month after the company offered voluntary buyouts to a few thousand workers.
But why is GM getting rid of all these jobs and closing down these plants? Let’s look at a few reasons as to why GM is falling apart like this. Part of this includes a desire to try and make the company more profitable and in control of its fortunes.
A Major Shift to Electric
GM wants to focus on electric vehicles in the future. These include vehicles that do not require fuel instead of hybrid vehicles that do use some fuel. The goal of GM is to have zero emissions in these vehicles.
Self-Driving Cars a Possibility?
GM also wants to explore the technology associated with producing self-driving cars. These include cars which have programmes with details of maps and driving directions. GM is aiming to possibly produce unique cars that are easy to handle while also avoiding crashes. The desire to reduce road congestion through the production of smart cars is a step that GM wants to follow down.
Focusing On Popular Cars
In recent time, people have been focusing more on hatchbacks and SUVs. Traditional sedans are not as popular as they used to be. People are looking at hatchbacks because they are designed with smaller needs in mind and have strong fuel economy ratings. These hatchbacks also cost less on average.
Meanwhile, SUVs are popular for commercial use and families alike. People who need to transport many at a time are benefiting from the functionality that comes with SUVs.
In fact, GM’s move to trim down some of its underperforming vehicles is similar to what Ford has done in recent time. The Focus hatchback and the Mustang are the only two traditional vehicles that Ford is making following that company’s change in its focus. All the other cars Ford is making are SUVs, vans, and trucks.
Another factor for GM is that the company wants to cut down on its expenses. GM is looking to save about $6 billion a year before 2020 ends. Getting its production totals down would help with ensuring GM can reach those cost savings.
The money that GM would save would be utilized to help make the technology supported by GM easier to work with. Part of this includes getting the technology for producing cars to work on all cars in the GM. Having a consistent framework for manufacturing would reduce the time it takes to make cars while also making the remaining employees more efficient in their work.
Are Tariffs the Reason?
President Trump’s move to add tariffs on steel and aluminium imports moving into the United States has hurt GM and other car manufacturers. GM stated earlier that Trump’s move would cost at least $1 billion a year.
GM has had to find ways to make up the losses that have come about due to the tariffs. Part of this includes attempting to raise the prices of some vehicles and to hold negotiations with suppliers to try and keep the costs associated with their vehicles down.
In fact, the decision from GM to close those plants has led to President Trump threatening to pull federal subsidies from the company. This is in spite of those subsidies expiring around the end of the year. Still, Trump and many of his supporters are upset that the company is focusing its production on spaces outside of the United States.
The greatest worry at this point involves how well GM is going to recover. While General Motors does indeed have a good plan for its vehicles, the company is not doing so well with its manufacturing efforts. Only time will tell as to how well GM’s plans for the future will go and what will happen in the future.