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GM To Close 7 Plants, Chop 15% Of Salaried Workforce

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GM To Close 7 Plants, Chop 15% Of Salaried Workforce

General Motors Company (NYSE: GM) is closing five plants in 2019 as part of plans to cut $4.5 billion in costs and lower capital expenditures by $1.5 billion by 2020, the automaker said Monday. 

Assembly lines in Oshawa, Ontario; Detroit; and Warren, Ohio, and propulsion plants in White Marsh, Maryland and Warren, Michigan are set to go dark in 2019, as well as two unnamed international plants. 

GM said it plans to cut its salaried workforce by 15 percent. 

"These actions will increase the long-term profit and cash generation potential of the company and improve resilience through the cycle," CEO Mary Barra said in a statement

GM shares were halted Monday morning prior to the news release. The stock was trading higher by nearly 3 percent percent at $37 when shares resumed trading 

What Happened

GM will shut down an Ontario plant that contributes to the firm’s more traditional — and stalling — portfolio, according to the Wall Street Journal. The 2,800-worker facility builds pickup trucks and sedans.

Last month, GM offered a voluntary severance program to 18,000 longtime salaried employees in North America. The cuts would not benefit the balance sheet until 2019, and GM conceded that it will consider layoffs at the start of 2019 if not enough workers accept the buyout. Employees can take the option until Nov. 19.

Why It’s Important

Some attribute the cost-cutting measures to anticipated dips in car sales, trade-based pops in raw material pricing, potential tariffs on auto imports and an expected economic downturn.

Others consider it reflective of GM’s natural shift toward electric vehicles. Despite earlier reductions, the automaker has committed to continue hiring for its next-generation projects. It took on 17,000 new workers over the last two years and said 40 percent of its full-time,global workforce joined GM in the last five years.

What’s Next

GM said it will double the resources it allocates to electric and autonomous vehicles in the next two years, integrate vehicle and propulsion engineering teams and "compress" global product development campuses. 

The restructuring plan is expected to cost $3 to $3.8 billion, with $1.8 billion comnig from non-cash accelerated asset writedowns and pension charges and as much as $2 billion in employee-related and cash-based expenses.

The costs will be funded through a new credit facility, the automaker said. 

Related Links:

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Dustin Blitchok contributed to this report. 

Posted-In: automakers automotive Big Three Wall Street JournalNews Legal Top Stories Media Best of Benzinga

 

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