GM targets 5 N.A. plants for closure, will slash 15% of salaried jobs

DETROIT -- General Motors said it will significantly cut its salaried workforce and could close up to five plants in North America, plus two more elsewhere, as it discontinues several car models as part of an overhaul of its global operations in 2019.

The automaker on Monday said Oshawa Assembly in Canada, Lordstown Assembly in Ohio and Detroit-Hamtramck Assembly in Michigan will end production in 2019 and not be allocated any products. Propulsion plants in Maryland and Michigan also will not be given any product.

Not allocating product doesn’t mean the plants will permanently close, but it puts their future and the jobs of roughly 6,700 hourly and salaried factory employees – 3,800 in the U.S. and 2,900 in Canada – at risk heading into contract negotiations with the UAW in 2019 and Canadian union Unifor in 2020.

All of the products currently assembled at those three plants -- Buick LaCrosse, Cadillac CT6, Cadillac XTS, Chevrolet Impala, Chevrolet Cruze and Chevrolet Volt -- are scheduled to stop being produced for the U.S. by the end of 2019.

GM also said Monday it will close two unidentified assembly plants outside of North America by the end of next year and restructure its salaried workforce.

The automaker expects the moves to contribute $6 billion in cash savings by 2020 — $4.5 billion in cost reductions and $1.5 billion in lower capital expenditures.

“This industry is changing very rapidly,” General Motors CEO Mary Barra told reporters Monday here. “We want to make sure we’re well positioned … These are things we’re doing to strengthen the core business.”

GM shares rose 4.8 percent to close Monday at $37.65.

Barra declined to discuss whether the plants could reopen as part of  upcoming union negotiations, citing the company is “unallocating them today.”

She later told analysts that the company is “committed to working with GM’s unions.”

The U.S. plant closures must be negotiated with the UAW. The union in statement said GM’s decision “will not go unchallenged.”

GM, according to its contract with Unifor, must give a year notice regarding a plant closure. That has not occurred; however, it is expected.

'Slap in the face'

Terry Dittes, the UAW’s GM Department director, in a statement said: “This callous decision by GM to reduce or cease operations in American plants, while opening or increasing production in Mexico and China plants for sales to American consumers, is, in its implementation, profoundly damaging to our American workforce.

"GM’s production decisions, in light of employee concessions during the economic downturn and a taxpayer bailout from bankruptcy, puts profits before the working families of this country whose personal sacrifices stood with GM during those dark days. These decisions are a slap in the face to the memory and recall of that historical American made bailout.”

In a statement, Detroit Mayor Mike Duggan described the news as "troubling" and said that the city's economic development team and the UAW union are "working together to come up with a solution that works for GM and the employees."

Canadian Prime Minister Justin Trudeau, via Twitter, said he spoke with Barra and expressed "deep disappointment."

Unifor President Jerry Dias promised “one hell of a fight here in Canada with General Motors,” and said that workers walked out of the Oshawa plant Monday morning in advance of GM’s announcement.

Salaried workforce reductions

The salaried workforce restructuring includes cutting 15 percent of its 54,000 salaried employees in North America — more than 8,000 — including slashing global executives by 25 percent.

Included in the salaried reduction is a recent buyout offering to 18,000 salaried employees that ended last week. GM declined to say how many employees accepted the voluntary offer.

Barra said the actions are not a result of “anything specific on the horizon.” They are meant to be proactive steps to ensure GM is “lean and agile.”

It was expected that GM needed to address underutilization of its plants. The announcement comes ahead of negotiations with the UAW in 2019 and Unifor in 2020.

GM represents 1 million of the 3.2 million units of underutilized capacity in the U.S. through October, according to the Center for Automotive Research.

The impending round of cost cuts follows measures taken in 2015-18, when GM targeted $6.5 billion in reductions, including restructuring unprofitable markets such as Europe and South Korea.

Plants and products

Oshawa currently has two assembly lines. The flex line produces the low-volume Cadillac XTS and Chevrolet Impala while the truck line produces the light- and heavy-duty Chevrolet Silverado and GMC Sierra pickups. All production is expected to end in the fourth quarter of next year

Detroit-Hamtramck currently builds the Chevrolet Volt, Chevrolet Impala, Buick LaCrosse, Cadillac CT6. U.S. sales of the Impala were down 13 percent through September. It employs 1,542 employees, including 1,348 hourly workers. Production of the Volt and LaCrosse are expected to end March 1, while the CT6 and Impala will cease on June 1.

Lordstown, which has dropped from three shifts to one in recent years, exclusively produces the Chevrolet Cruze. Sales of the compact car were down 27 percent through September, GM said. It employs more than 1,600 employees, including 1,435 hourly workers. Cruze production, including an imported hatchback from Mexico for the U.S., is scheduled to end March 1.

It’s unknown at this time how many plant employees will be cut, as some could retire or be offered positions at other plants. 

Those who are not placed elsewhere or retire will be placed on indefinite layoff.

The discontinued vehicles, many with high levels of inventory, will continue to remain for sale after production ceases.

GM expects to fund the restructuring costs through a “new credit facility” that the company says will “further improve the company’s strong liquidity position and enhance its financial flexibility.”