Strong economic headwinds, according to General Motors' statement, are the reason for the biggest reorganization since America's most important automaker went bankrupt a decade ago.
Back in 2008, only one day after it officially went bust, American tax dollars assured that it could already make a fresh start. Ever since then, GM has only grown, partly due to low-interest rates and oil prices.
US consumers purchased new and ever larger cars from them. Proud to do so as it was an all-American brand.
The best years now seems behind them again. Even GM's CEO Ms Mary Barra does not explicitly say it, but this is partly due to the policies of the current US President.
Because of the White House’s import duties on steel, the costs for General Motors have increased by 1 billion dollars as American steel magnates increased their prices as foreign steel and aluminum had become more expensive.
In addition, sales to China fell as a result of the trade dispute with the US. Another pertinent example is Tesla, which also saw October sales fall by as much as 70 percent. That particular decline is also (partly) caused by Chinese customers having postponed their purchases.
Also, the taste of the American consumer has changed in the past few years, and GM did not adapt its factories to this.
SUV versus sedan
The traditional sedan, the classic model with a boot, is seeing fewer sales whilst SUVs and trucks are flying out the door.
Two-thirds of all new cars in the US are SUVs.
Some of GM's plants are barely able to handle demand let production run seven days a week. Others don’t have much to do.
Furthermore, analysts expect that this year car sales in the US will not exceed seventeen million units. That is the first time in years.
Due to the decreasing demand in some factories, only one shift is used instead of the usual three.
The old-fashioned way GM produces didn’t help either: in many factories, only one model is built. If demand for that model falls, problems soon arise.
To complete the gloomy picture, car manufacturers also face increasing costs. Partly because of the many billions that they have to put into the transition to electric and autonomous cars.
Time to 'rightsize' as GM boss Barra calls the reorganization. This mainly means a substantial cut in staff costs, if only because fewer employees are needed for the construction of electric vehicles. E-cars have fewer parts than a model with a combustion engine and transmission. "This industry is changing very quickly," Barra said during a press conference. "We have to do this to strengthen our core activities."
Related coverage: GM Cuts Astonishingly Deep In Trump Heartland (Video)
Trump strongly condemned the announced closure. The president won in Ohio in 2016 with the promise that he would bring back jobs. It is here that GM is now closing one of its factories.
The US President realizes that the chances of a possible re-election in 2020 do not bode well with a declining economy. He demands that GM produce a new model in Ohio or threatens to cut state subsidies. "They'd better bring something back," President Trump said.
It is uncertain whether American car bosses will be listening to Trump's threatening language.
For example, the American factory where the Chevrolet Cruze is built will be closed, while GM will probably keep the facility in Mexico where the same model is produced, much to the irk of US consumers.
One bright spot is that GM intends to hire more and more young whizzkids to program the software for its self-driving vehicles. More jobs for the higher educated employees thus.
Problem is that they vote less often for Trump.
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