News broke not long ago today about how GM (General Motors) is planning some big changes. It’s being reported that the company intends on closing factories in Michigan, Ohio, Maryland, and Canada, ending production of several passenger cars, and removing 15% of its workforce on salary in an attempt to cut $6 billion in costs and boost profits.
Approximately 14,700 jobs will be cut across five North American facilities including car and transmission plants. GM has released statements claiming that the move comes to get ahead of issues while the economy is strong, citing that the plants closing down are primarily responsible for producing slow-selling cars.
Among the vehicle models that are being discontinued are; Chevrolet Volt, Chevrolet Cruze, Chevrolet Impala, Cadillac XTS, Cadillac CT6, and the Buick LaCrosse.
The company has stated that these measures are being taken too boot profits and reduce costs as it shifts to a business model that comes with higher expenses upon market entry, specifically electric and automated vehicles.
This move puts GM right alongside fellow American automaker Ford, who stated in April that it was planning to halt almost all car production in North America.
While those who take issue with tariffs will be quick to point out the economic policy handed down by the Trump administration as the primary cause of the downsizing currently being undertaken by American automakers, tariffs seem to only be a portion of the issue at hand. Yes, the tariffs play a role as GM and Ford have both stated tariffs on steel have cost the company upwards of $1 Billion, and Toyota claims the tariffs will raise the cost of popular models by $1-3k dollars. However, tariffs do not seem to be the primary issue in this case. Along with the losses that come with tariffs, the automotive industry is also seeing a sharp decline in consumer preference for passenger cars, and a growth in preference for larger vehicles like pick-up trucks and SUV models.
What seems to be happening is a bit of a perfect storm. In an attempt to get ahead of consumer demand (production of self-driving and electric vehicles,) adjust to offset losses from economic policy, and pivot in the face of consumer preference, GM and Ford alike are tightening things up. It is likely the “never Trump” crowd will pick up the torches and pitch-forks and exalt this information as further proof of economic policy failure, but there’s a more meaningful discussion to be had once you peel back the ‘team sports’ political rhetoric. The changes being made to the companies that are downsizing and belt-tightening are being made to adapt to changes in a fast-paced market. And while the hit from tariffs is substantial, they are not the only source pushing the pivot from some American automakers. Are these moves wise? Do you think these auto companies are finally taking proactive measures to avoid another federal bailout situation, or is this just another example of a dying giant gasping for air despite being artificially propped up by federal subsidies?
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