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GM To Close 100-Year-Old Oshawa Plant, Affecting Thousands Of Jobs

November 26, 2018

GM To Close 100-Year-Old Oshawa Plant, Affecting Thousands Of Jobs

With car sales in the US and China locked in a precipitous slowdown that is only expected to worsen, GM on Monday is expected to announce the closure of one of its Canadian plants as the company hopes to move more production to Mexico and (hopefully) bolster its lagging shares, Reuters reported. The company’s plant in Oshawa, Ontario – the plant in question – produces slow-selling Chevrolet Impala and Cadillac XTS sedans, while also completing final assembly of the better-selling Chevy Silverado and Sierra pickup trucks, which are shipped from Indiana.

GM

The outcry from the union and local officials is already causing political pressure on GM to mount after the carmaker accepted billions of dollars in subsidies from the Canadian and US governments after filing for bankruptcy nearly a decade ago. But the company must weigh these considerations against the demands of Wall Street analysts, who believe that GM has too many plants in North America. Signaling the start of the carmaker’s latest cost-cutting initiative, the company said on Oct. 31 that about 18,000 of its 50,000 salaried employees in North America would soon be eligible for buyouts.

Two sources told Bloomberg that the announcement of the plant’s closure is expected on Monday.

The closure is not unexpected. In a message to employees last month, GM CEO Mary Barra cited the stagnant share price as a reason for tougher restructuring measures.

Unifor, the Canadian autoworkers union that represents the plant’s employees, told Bloomberg that it has been told there is no car production planned at the factory beyond next year, raising the prospect of talks to preserve jobs. Unifor National President Jerry Dias said back in April that the Oshawa complex had been slated for closure in June of this year. But he added that one top GM Canada executive had vowed that it wouldn’t close on his watch.

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China Mess, Yuan Devaluation Spread to the US

August 14, 2015

China Mess, Yuan Devaluation Spread to the US

China’s auto market, which had been the single most important element in the convoluted growth story of GM and other global automakers, was getting battered even before the yuan devaluation. But now elements coagulate into a toxic mix.

Sales of passenger vehicles in July dropped 6.6% from a year ago, to 1.27 million, according to the China Association of Automobile Manufacturers, a 17-month low, after they’d already fallen 3.4% in June, and after they’d relentlessly trended down since late last year.

This debacle happened even though automakers had cut prices and heaped incentives on the market to stem the decline. GM and VW started it, and it has now turned into a price war.

GM’s sales through its joint ventures fell 4% in July year-over-year, to 229,175 vehicles. Despite falling sales and ballooning price cuts, GM remains, at least in its press release, optimistic about sales and profit margins in China, its second largest market, and simply blamed “model changeovers and the phasing out of older Chevrolet vehicles.” So no biggie.

Ford’s sales through its Chinese joint ventures plunged 6% year-over-year, its third monthly decline in a row, to 77,100 vehicles. Unlike GM, it’s publically worried:

“Longer term, we’re still very bullish on China,” Hau Thai-Tang, head of Ford’s global purchasing, told an industry conference in New York. But the company would move to lower output in China if there is a “prolonged period of recessions.”

While some automakers booked gains, like Daimler whose sales surged 42%, others got clobbered, like Nissan whose sales plunged 14%. And VW said today that its Audi sales in July had plummeted 12.5% in China, Audi’s largest market. It sells about a third of its cars there.

 

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The Unnerving Thing Global Automakers Just Said About China’s Economy

August 5, 2015

The Unnerving Thing Global Automakers Just Said About China’s Economy

Global automakers, still intoxicated with their own optimism after years of white-hot growth that transformed China’s auto market from a backwater to the largest market in the world, have an increasingly chilling message.

The auto industry is a huge force in driving economic growth in China. Most vehicles sold in China are manufactured in China. The component industry has been booming. The distribution and dealer network has been growing in leaps and bounds. Every new plant and dealership means more construction, more equipment, more jobs. Then there’s finance and insurance and all the other elements that make up the car business. But now there’s a slowdown.

Today it was BMW. China has been BMW’s largest, most promising, nirvana-like market. Not that BMW’s results for Q2 were that bad. The euro’s swoon produced a year-over-year sales gain of 20%. Yet, due to soaring costs, despite the weak euro, net profit fell 1.1%.

The problem: China’s market is “normalizing” and “becoming increasingly competitive,” BMW said in a statement. “In the medium and long term, we remain utterly convinced of China’s potential for growth,” it said. But it warned, “If conditions on the Chinese market become more challenging, we cannot rule out a possible effect on the BMW group’s outlook.”

China’s contribution to BMWs operating profit dropped 23% in Q2, echoing Volkswagen’s report last week. BMW has cut production in China by 16,000 vehicles this year, CFO Friedrich Eichiner explained. He blamed the stock market. As it crashed, it kept customers from making large purchases; others demanded hefty discounts.

“Normalization” means the Chinese market is in the transition from Nirvana to a rough-and-tumble saturated market where brands have to fight each other for market share to get any sales increases. But no problem: “In the medium and long term, however, we remain utterly convinced of its potential for growth…” he said.

 

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