By on February 6, 2019

Image: GM

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.

Image: GM

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]

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50 Comments on “Despite Big North American Earnings, Barra Says GM Plants Have to Go...”


  • avatar
    thornmark

    Just say NO to Chinese “Buicks”.

  • avatar
    NoID

    The remaining hourly workers are all getting fat profit-sharing checks, so that’s nice.

    Good news for Flint. Good news for shareholders. Little solace for the people being laid off. One of my friends had his contract run out in November and he was not renewed, and a colleague of mine here in the office is in a group chat with some friends, of whom one was a GM employee, and my colleague was receiving live updates as heads rolled (including his friend in the chat, unfortunately). Talk about a case of the Mondays.

    FCA’s arms are open wide to receive the downtrodden, based on their pages and pages of open positions on their careers website.

  • avatar
    28-Cars-Later

    Boycott GM.

  • avatar
    beachbumchris

    I’m done with GM and American car makers. I’ve been very happy with my last two GM cars, but I’m looking for a new compact SEDAN to replace my 2014 Chevy Cruze. I’d be interested in a new Cruze but no longer after GM insists on cutting its small sedan lineup. I don’t want an SUV or truck. I want a CAR, something that handles and rides well, gets good fuel economy, fits in my 1 car garage and is easy to park in the city. First FCA guts its sedan line up, then Ford, and finally GM. You’ve lost a good customer GM. Congratulations Mazda, my next CAR will be the 2019 Mazda 3.

  • avatar
    el scotto

    Lordstown Assembly; the cradle of GM mediocrity.

  • avatar
    tomLU86

    Why do “the hourly workers loom large” over Mary Barra’s victory lap this morning?

    What about GM’s contract and salary workforce. Despite being what must be an unacceptable cost burden for Ms. Barra, GM did quite well.

    GM is cutting approximately 8,000 of them, which is more than the hourly jobs being lost. According to the Detroit News, GM notified the state of Michigan of 1,296 cuts in their Warren campus alone.

    Another thing that won’t surprise me is that Americans like Beachbumchris, who want a car, even a GM or “domestic” car are not going to buy a GM or “domestic” crossover; they are going to buy Asian.

    And this will reinforce the Asian companies.

    Once GM FOLLOWS Ford, which followed FCA, and eliminates it’s carmaking capacity, because it was not profitable enough, if tastes change (unlikely) or we have an oil shock and public wants new cars, the Americans will be unable to provide them, and the profits from gas-guzzlers will evaporate.

    Stay tuned….

  • avatar
    SCE to AUX

    Like it or not, Ms Barra is not wrong.

    Dying nameplates need to be culled, and high-cost plants can’t exist merely as jobs programs. Shareholders demand ROI, and GM needs to remain a sustainable business.

    • 0 avatar
      JD-Shifty

      why would you punish an automaker for running leaner?

      • 0 avatar
        SCE to AUX

        I think you misread my post. As HDC says below, GM’s failure to run lean in the time before 2009 meant it went bankrupt. Ms Barra is trying to avert a second disaster.

    • 0 avatar
      highdesertcat

      “GM needs to remain a sustainable business.”

      GM already proved once it was neither viable nor sustainable, and it took taxpayer bucks to put them on life support.

      We should give credit to Ms Barra for trying to keep GM alive by making it lean and mean, which in itself is an almost impossible task when you have to deal with the UAW or any union.

      The focus on HD trucks, and the resulting $10K+ profit for GM on each truck, means that the loss-centers will be culled, just like Olds, Pontiac, Saturn etc were culled.

      Ms Barra’s only responsibility and obligation is to the Shareholders. By trying to keep GM profitable and in operation, the remaining employees will continue to pay taxes to the Treasury, both in the US and abroad.

    • 0 avatar
      blockmachining

      By what I’ve read and experienced, an automotive production facility needs to run at approximately 88% utilization to break even. A plant running one shift is no where near 88%. I’ve heard the corvette plant in Bowling Green is only running at 22% but they are building a high profit product so hopefully that covers some of the under utilization.

  • avatar
    tomLU86

    Sustainable vs ROI.

    In the context of ROI, closing those plant is not a hard call. Even though the tooling is paid for, if they are only running one shift, they are not making as much as they ‘could’. Does this mean they are losing money? I honestly don’t know, but I doubt it.

    I’m certain that the electric car program at GM, from the EV1, thru Volt (touted to get the govt to save GM), to the Bolt, to whatever is coming, is a huge money loser. So much for ROI. Just think of how much GM might have made without this burden.

    In the context of sustainability, if the market changes in the future and shifts to cars, GM had slack capacity that existed. Now it does not, so those customers will shift to cars. Even expensive restaurants sell chicken and pasta, even though filet mignon has a higher ROI. Not everyone wants fillet. And that’s one reason that maybe the electric/autonomous stuff is not totally imprudent. Maybe.

    It’s harder to account for the fixed costs.

    The stated reason for GM’s need to generate more profits is to fund electric autonomous. In terms of ROI, GM hasn’t done well here…but it will put more money here. Is that what the stockholders want?

    In free society, even one where fuel is expensive, like France, IMO electric/autonomous will always be a niche product. Tesla is a niche company.

    For one thing, it’s very hard to compete with the versatility of gasoline.

    If GM plans to go from a being a large company to being Tesla sized (maybe THAT is the vision), and thinks it can generate better ROI, good luck.

    However, a smaller company like that needs a lot fewer people–it can’t tolerate a lot of overhead, like salary people. So, if I’m one of the salary people remaining, toiling on ‘conventional’ trucks, I’d assess the odds of being with GM in 5 or 10 years, and work accordingly.

    Not exactly a recipe for ‘harnessing all the potential of our employees’

    If GM plans on staying big, it will need coercion (ie the government) to bend consumer will to electric.

    This is not unprecedented–after all, it is only through government coercion (the forced confiscation of people’s wealth thru taxation, to be reallocated as govt sees fit and proper) that GM obtained the support to stay in business, which enabled an ambitious executive, who has been only at GM her entire working and even college life, to eventually become CEO.

    (And this rankles a lot of people. As a former ward of the state, why should GM’s CEO and top execs be paid so much? If the rationale for saving GM was to save jobs, why should GM fire people when it is doing well? When GM took US/Canadian public money to survive, it ceased to be a truly private entity)

    And that’s probably the game plan. Force electric on society, in the name of the ‘greater good’. “Zero emissions, zero congestion, zero fatalities”. It sounds so good! The elite appreciate it, even if we peons don’t buy it.

    In a free society, electric cars lose, unless they are heavily subsidized, and gasoline vehicle drivers are punished, for which govt has a variety of “tools” to use.

    • 0 avatar
      JD-Shifty

      Do you think Japanese automakers and other industrial manufacturers there are “wards of the state” Miss Rand?

    • 0 avatar
      HotPotato

      Heavily subsidized? You mean like with wars and worldwide bases and military aid to vile regimes to keep that sweet cheap oil flowing?

      • 0 avatar
        highdesertcat

        A matter of priorities decided by the majority.

        And speaking of cheap oil, I filled up my grand daughter’s 4Runner today at $1.839/gal for RegUnl 87-octane.

        Insanely good!

        Love it!

        And the price of gas and diesel is supposed to go lower yet.

        How low can we go?

  • avatar

    GM does not need engineers to please Wall street and if it even need them Chinese engineers will suffice. Outsource this damn thing already!

  • avatar
    dusterdude

    Use to feel good about GM , but they have lost any and all goodwill in my view …

    • 0 avatar
      highdesertcat

      Yup, I feel the same way. I used to be a GM fan. Bought a few NEW GM products over the decades. Owned a boatload of used GM vehicles.

      But in 2008 I found better.

      TOYOTA! Oh, What A Feelin’.

      • 0 avatar
        Peter Gazis

        Highdesertcat

        What does Toyota got: Falling car sales; a couple of crossovers; a bunch of crap that doesn’t sell worth a sh’t; and a few antiques in desperate need of a complete redesign.
        There’s only so much crap you could sell to rental companies, and I think Toyota hit the limit.

        • 0 avatar
          Dave M.

          Record sales, long history of reliability, competitive products. I’m in the market for a new vehicle now. And after test driving the Jeep GC, GMC Acadia, and Toyota 4Runner, based on consumer reliability research I’m going to have to go with the Toyota. While it’s a long-in-the-tooth design, I know it’s going to last me 10+ years. I really did like the Jeep; I was surprised at the lack of quality control in the Acadia. Very flimsy interior assembly. Too bad, because it’s a sharp looking vehicle.

          • 0 avatar
            Peter Gazis

            Dave M.

            I drove my dads 2016 4Runner once. Hated it. The brakes were weak; the engine struggled at 40mph; the infotainment system sucked. Hard plastic everywhere; and it still used a key to start the damn thing. After an hour of driving in suburbia I was ready to abandon the thing and walk the rest of the way.
            Thanks, but I spend over an hour a day in my vehicle. I don”t want to spend that hour dealing with Toyota’s torture chamber.

        • 0 avatar
          highdesertcat

          Peter Gazis, why all the hate toward Toyota?

          It’s one hell of a car maker and its products work for those who buy them.

          Toyota, Honda, Nissan rose to prominence in America because it was Detroit/Auburn/Dearborn that was putting schit on the road.

          Buyers wanted value for their money, and they got it from Toyota.

          If Toyota’s products are schit, as you seem to think, the market would have shook them out like Suzuki, Pontiac, Saturn, Oldsmobile, Mercury, Plymouth, DeSoto, et al. They GONE!

          I started as a GM fan, owned Ford as well. But when I buy another new vehicle, IT WILL be a Toyota product!

          Hey, I’ve had the rest. Now I only want the best.

        • 0 avatar
          el scotto

          Mr. Gazis,
          I used to work in the automotive parts quality control industry. Overall, I can state that Toyota and Honda continuously run both more and more strict quality control procedures than GM and Ford. This comes from setting up tests in factories that make parts for many automobile companies and the aftermarket and company-specific factories. Do I think that rigorous quality control on parts make for a better vehicle? In a word; YES. Anecdotally, go to a local “public auto auction”. Compare the prices of Toyota/Hondas to comparable GM/Ford products. I know which will cost more. Are these wise buys? That’d make a great QOTD.

  • avatar

    What is GM going to do about it’s rubbish interiors. It is becoming a big problem, and is indirectly related to their lack of success.

    • 0 avatar
      Lorenzo

      They’ll continue making rubbish interiors, just as they’ll continue with uncoordinated, ineffective advertising. They saved a lot of money with those cheap interiors, and that makes them sell themselves!

      Seriously, their subcompact and compact cars have been several cuts above their historical quality, but the interiors and styling have the look and feel of punishing econoboxes. Competitors have been putting higher quality interiors into their compact and subcompact cars, eating into GM sales – big time – and GM brass hasn’t got a clue why.

      • 0 avatar

        Maybe GM truck owners mistakenly equate cheap interiors with toughness. They probably want a blue collar looking interior environment. In this environment cheapness may actually be a virtue. A high quality Lexus-like interior in a GM truck is tantamount to a hillbilly wearing a Rolex watch.
        Another explanation is that people that buy GM trucks are less discriminating. They may simply not notice the cheapness of the vehicles interior design. At the subconscious level they want the interiors of their trucks to look cheap. In the truck market any kind of sophisticated is frowned upon.

      • 0 avatar
        Peter Gazis

        GM is planning something like Bum-Wars. Where it and the other Detroit companies sit on the sidelines, while the Asians beat the hell out of each other.

  • avatar
    Mr.EpMini9

    Mary is a great leader who sees the future and take actions now.

  • avatar

    Mary Barra is a flawed visionary like Roger Smith. She has good intentions, but is ultimately making all the wrong decisions. The truth is there is no market for either massed produced electric or autonomous vehicles. Like Roger Smith, it won’t end well for Mary Barra. Mary does not make strategic long-term decisions, but instead makes hunches based on the latest trends. In the quest to embrace the next “big-thing” Barra’s does not see the big picture.

    Others say Barra has no vision at all and is just a wall street puppet. Whatever category you put Barra in she isn’t doing GM any favors.

  • avatar

    Maybe GM could increase plant utilization past 70 percent if they actually assembled some of their higher margin, better selling C/SUV’s like the Buick Envision (China), Chevy Blazer (Mexico), Chevy Trax/Buick Encore (Korea) HERE IN AMERICA. For the brain trust at GM to bite the hand that literally saved their a$$es is a shortsighted financial move that will have long term negative ramifications for many potential buyers of any GM products in the future. Oh, and forget about a future bailout when GM’s headlong rush into electrification and autonomous vehicles becomes the impending disaster it appears to be.

    • 0 avatar
      PrincipalDan

      I’m always amazed by GM in that they generally have 2 plants manufacturing the same vehicle. That will never hit utilization targets.

      The current Equinox as an example is being built in Ontario and in Mexico. Why? Go to 100% utilization of a plant. The GMC Terrain (twin) is being build only in Mexico.

      Some of the sedans that GM is killing were built in two places as well. Why?

      Just streamlining some of those operations would have been a big improvement.

      • 0 avatar
        Peter Gazis

        PrincipalDan

        Last yesr, GM sold 480,000 Equinox/Terrains between the U.S & Canada, and a few thousand more in Mexico, South Korea & Australia. I think both plants are already running close to 100%.

  • avatar
    cognoscenti

    Having worked for each of the Big Three for many years, and having thoroughly seen the inner workings of each of them, I can honestly say that GM is without doubt the most healthy of the domestic vehicle manufacturers. I’m confident that in time the moves, painful as they are, being made by Mrs. Barra and her team will be shown to be the right strategy. People that I know well and care about are losing their jobs right now, and I can still type these words.

  • avatar

    what has to go is her!

  • avatar
    GM JUNK

    GM continues to go down in flame and no end in sight. Bye bye GM!

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