Despite Big North American Earnings, Barra Says GM Plants Have to Go
Despite a year-over-year sales drop in the fourth quarter of 2018, a higher average transaction price spurred by growth in high-margin vehicle sales in North America returned better than expected Q4 earnings for General Motors.
The company’s strong showing comes as its overseas ventures sank and headwinds gathered at home and abroad; mainly, predictions of a slower 2019. That’s GM’s outlook, too, which explains why CEO Mary Barra isn’t backpedaling on her plan to shutter five North American plants.
“Our outlook for China overall is for the auto industry to be flat year over year,” GM Chief Financial Officer Dhivya Suryadevara told reporters Wednesday, as reported by Reuters. Asian-market sales, of which China represents the bulk, fell 21.7 percent.
Still, the flow of cash from North American buyers rose on the strength of pickup, crossover, and SUV sales, and the company’s global operations posted revenue of $38.4 billion, with net profit coming in at $2.1 billion. This return beat analyst estimates, lifting the company’s stock. Hourly workers can expect a $10,750 profit sharing check.
Still, it’s the hourly workers who stand to lose their jobs at soon-to-be-mothballed plants who loomed large over Barra’s press conference.
The company’s CEO steadfastly claims that a leaner GM is necessary for future success, especially with analysts predicting a years-long cooling off period in vehicle sales. While 2018 beat many expectations, lower incentivization and reduced fleet sales are becoming the norm. Interest rates are on the rise, further suppressing sales.
GM recently culled five passenger car models, preferring to make up the loss in sales of higher-margin light trucks. To that end, a product offensive is underway, starting with revamped full-size and heavy duty pickups, a new medium-duty line, and wholly new models like the Chevrolet Blazer.
Underutilized car plants are anathema to this strategy.
“We can’t run at a 70 percent utilization,” Barra said Wednesday. “We had to improve that … It’s a transition we have to go through.”
Sticking to the tough medicine line hasn’t decreased the backlash against the company, though the automaker’s Tuesday announcement of 1,000 jobs coming to Flint Assembly in support of the 2020 Chevrolet Silverado HD will ease the anxiety felt by many hourly workers. The company is giving priority to workers facing layoff at other U.S. GM plants, which does nothing to brighten the future of Canadian workers at the doomed Oshawa Assembly plant.
On Monday, GM started the process of issuing pink slips to roughly 4,000 salaried workers, half of the 8,000 it plans to shed from the company’s North American ranks. In total, the automaker expects to cull 15,000 employees to save $6 billion in cash by 2020.
[Images: General Motors]
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