GM Surprises Everyone with Layoffs

November 27, 2018 6:26 am Published by Leave your thoughts

INTRO The American auto industry was walloped during the recession and received over $80 billion in cash through stock purchases through the Treasury Department TARP (Troubled Asset Relief Program). Ford received a loan from the Term Asset-Backed Securities Loan Facility. The debt reorganizations involved mergers, acquisitions, and a myriad of guarantees the automakers were required to agree to in exchange for a financial lifeline. CNN

LAYOFFS Today, GM announced that it would close five plants in North America and laying off about 15,000 workers. According to CEO Mary Barra, the layoffs were part of a plan to cut costs and invest in electric and autonomous vehicle production. Too bad she didn’t give more specific details about what precisely the company’s plans are. Hopefully, we will find out soon. Fortune

Maybe the announcement came as a surprise or, perhaps it didn’t. GM and GMAC, known as Ally Financial, sold multiple tranches of new equity by the time the Treasury Department finally liquidated its holdings in the company. It did so at a taxpayer loss of over $1 billion. The Balance

One of the reasons given for the plant closures today was for the Company to improve its ability to compete. Unfortunately, GM is not known for being great at adapting quickly enough to shifts in global auto markets. GM’s move gained investor confidence and stocks were up by 6% today.

POLITICS Trump took issue with the announcement, likely over concerns about the impact it would have on mid-western voters in rust belt states such as Ohio that he carried in the 2016 election. Lawmakers are openly criticizing the company for taking profits from record tax cuts and running away with them rather than protecting jobs and supporting the workforce.

What will be interesting to watch is how other auto-makers respond to the GM decision. Will executives at Chrysler and Ford make similar cuts or, are they already further along adapting to the changing consumer appetite for personal transportation.

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This post was written by Daniel Jones

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