Politicians and unions reacted with anger, but investors at least applauded General Motors’ decision to wield the ax. As far as Wall Street is concerned, the carmaker’s Monday morning announcement of 14,000 job cuts shows a company getting to grips with changing US consumer tastes and getting ahead of any market downturn. Shares rose 4.8 percent after the group said it would shed 15 percent of its North American workforce and shutter seven facilities worldwide to save $6bn.
The largest US carmaker is protecting itself against the storm that is heading towards the global car industry, it said. Manufacturers are having to pump investment into new technologies such as electric and self-driving vehicles, against a backdrop of rising costs and falling demand for passenger cars. “This makes us more resilient to the cycle,” GM chief financial officer Dhivya Suryadevara told investors. The US and China — the automotive world’s two largest markets and GM’s only two meaningful sources of profit — are both under strain.
In the US, higher costs caused by new tariffs come as consumers shift towards larger, thirstier vehicles. In China, sales have fallen sharply as growth slows and consumers feel the pinch from the trade war with the US. The result has been ripples across the auto world, from profits warnings from Daimler and BMW to Geely’s decision to abandon the initial public offering of Volvo Cars.
Karl Brauer, the executive publisher at Autotrader and Kelley Blue Book, said: “For several years everyone has been talking about the impending upheaval facing the auto industry. Today we got our first major preview of how this upheaval will manifest.” Mr Brauer added that GM’s decisions would “take a heavy toll on much of the current workforce”. GM has contract negotiations with the UAW union next year.