Despite Big North American Earnings, Barra Says GM Plants Have to Go

Steph Willems
by Steph Willems

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.

Canadian autoworker union Unifor began running ads slamming the company after calling for a boycott against Mexican-made GM products.

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]

Steph Willems
Steph Willems

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  • Ajla "Gee, wonder why car (as well as home) insurance rates are much higher in places like Florida..." Severe weather is on the list but even if a benevolent genie reverted the climate to circa 1724 I think FL would still have high cost. Our home insurance rates have increased 102% since 2021 and I don't think weather models account for that much of a change in that period. Florida's insurance assignment of benefit regulation meant that it had ~80% of the country's of the insurance lawsuits on ~12% of the nation's claims and litigated claims can be expensive to insurance companies. The state altered some regulations and is having some success on getting more companies back, even with the severe weather risks, through relatively bipartisan efforts. With car insurance just beyond the basic "Florida" stuff, the population increase of the past few years is overwhelming the roads. But, I think the biggest thing is we have very low mandated car insurance levels. Only $10K personal injury and $10K property damage. No injury liability needed. And 20% of the state has no insurance. So people that actually want insurance pay out the nose. Like I commented above my under/uninsured coverage alone is 2.5x my comprehensive & collision.
  • Juan Let's do an 1000 mile drive and see who gets there first.
  • Eliyahu CVT needed for MPG. Outback is indeed the legacy of, err, the Legacy.
  • Gayneu I can comment on these. My wife always thought the Minis were "cute" so I bought her a used 2005 (non-S, 5 speed) for one of her "special" birthdays. She loved it and I kinda did too. Somehow a hole developed in the transmission case and the fluid drained out, ruining the car (too expensive to fix). A local mechanic bought it for $800.We then bought a used 2015 S (6 speed) which we still have today (80k miles). Her sister just bought a used S as well (also manual). It has been a dependable car but BMW-priced maintenance and premium gas hurts for sure. I think the earlier generation (like in the article) were better looking with cleaner lines. The 2015 S rides too stiff for me (Chicago roads) but is a hoot on smooth ones. It does seem to shift weird - its hard to describe but it shifts differently from every other manual I have driven. No matter how hard I try, so won't let go of her Mini.
  • Crown Seems like they cut some cylinders too.A three cylinder...where are they planning on selling that??