American auto giant General Motors has announced far-reaching changes that may signal its first tangible acceptance of the inevitability of electric mobility, but that will first mean closure of five manufacturing plants worldwide and sacking 15 per cent of its workers.
The major restructure will mean the automaker can slash costs by $US4.5 billion ($A6.2 billion) and lower annual capital expenditure by $US1.5 billion ($A2 billion) by 2020, as it turns its focus to align with its new motto of “Zero Crashes, Zero Emissions, Zero Congestion”.
GM’s executives are not immune to the changes either, with the automaker saying it will line up a quarter of its executive staff for the firing line as part of the transition.
Instead, GM says it will double investment in electric and autonomous vehicle technology, integrate vehicle and propulsion engineering teams, minimise its global product development footprint, and streamline development through virtual tools to further lower costs.
It will also halt production of 6 sedan models, in recognition that in GM’s markets (most significantly the US and China), sedans have fallen out of favour in preference for SUVs and crossover models.
Notably, included in the 6 sedans on the chopping block is GM’s plug in hybrid Volt – which has taken a backseat in sales to the all-electric Chevy Bolt, a victim of the gaining popularity in pure electric cars, as Americans embrace electric mobility as never before.
The move by GM has clearly been precipitated by both the success of Tesla, whose vehicles are leading car sales in just about every category they contest in the US, and the failure of its unsuccessful campaign with other American automakers to have proposed fuel efficiency regulations stopped in their tracks.
“The actions we are taking today continue our transformation to be highly agile, resilient and profitable, while giving us the flexibility to invest in the future,” said GM Chairman and CEO Mary Barra in a statement.
“We recognize the need to stay in front of changing market conditions and customer preferences to position our company for long-term success.”
The factory closures – which will happen by the end of 2019, and include assembly plants in Detroit and Ohio, and Ontario, Canada, as well as propulsion plants in Maryland and Michigan, and a previously announced closure in Korea – will also see 17,600 workers stood down due to the restructure.
Ironically, the closures – what GM describes in its corporate speak as “unallocated” plants – have also been triggered by the tariff war sparked by president Donald Trump, supposedly in the name of protecting US manufacturing. But it has caused prices of steel, for instance, to soar.
“These actions will increase the long-term profit and cash generation potential of the company and improve resilience through the cycle,” Barra said.
GM did not provide any details on what the restructure means in terms of number of electric vehicle models, or a target percentage of electrification. But the flagging sales for the carmaker’s all-electric Bolt suggest there is more to be done than simply make more electric cars.
Indeed, the streamlining process suggests GM proposes to follow a strategy similar to that currently being employed by rival Volkswagen.
Volkswagen AG have developed a modular electric drivetrain platform that it has said will allow it to produce EVs at a fraction of the cost of Tesla, and says it has already booked in its production facilities to make 50 million electric cars.