30 November 2018

The future comes at a price

The terrible news this week surrounding General Motor’s major restructuring, including the closure of five North American plants and slashing 15% of its salaried workforce, has finally marked the end of an era for not just the US automaker, but the entire automotive industry. This decision will see the death of many plants that are producing such models as the Chevrolet Cruze and the Chevrolet Volt hybrid. On top of this, GM will also be closing two additional plants outside of the region in 2019. So, what is this all down to?

Well, as most people call it, the ‘transport revolution’ is forcing automakers to completely restructure their businesses, which is very bad news for their workforces. Production-line workers who have been involved in the automotive industry for years are, unfortunately, being forced out due to new demands from the OEMs. It is a pretty scary time for automotive engineers, who have taken so much pride in these factories over their careers.

GM released a statement on Monday which read: “The company is transforming its global workforce to ensure it has the right skill sets for today and the future while driving efficiencies through the utilisation of best-in-class tools. Actions are being taken to reduce salaried and salaried contract staff by 15%, which includes 25% fewer executives to streamline decision making.” It is time for GM to move away from its less profitable products, such as its passenger-cars, and concentrate on the products that its customers want the most.

But this isn’t all doom and gloom. This shows that automakers like GM are trying to prepare for a new market, streamlining their businesses to focus on future transportation such as mobility-as-a-service and connected car technology. As painful as this may seem, CEO Mary Barra is probably doing the right thing for the struggling automaker, which has seen low-returns from certain areas of its business. Much like we have seen with Ford, which has reduced its production in the US to trucks, SUVs and its iconic Mustang model, GM understands that there is little room in the market to profit from. So where to next?

Although GM plans to cut its annual spending to $7 billion by 2020, from an average of $8.5 billion between 2017 and 2019, it is investing significantly in the development of electric and autonomous vehicles. It will also launch 20 new electric models in North America by 2023, and at least 10 in China by 2020. These steps will allow the traditional automaker to transform into a mobility pioneer. However, for its existing workforce, future profitability will, inevitably, come at a price.


Alex Kreetzer

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