General Motors has announced layoffs including at its self-driving Cruise. The layoffs come at a time when General Motors shares have been underperforming markets and are only marginally above the 2010 IPO price.
General Motors is laying off 1,300 employees in Michigan of which the maximum 945 workers are at Orion Assembly and build the Chevrolet Bolt model. It is discontinuing the production of its Bolt EV (electric vehicle) model at the plant but is not phasing out the model as it was previously contemplating.
General Motors lays off employees
General Motors launched the Bolt model in 2016 ahead of Tesla’s Model 3. However, Bolt sales never took off to the extent that the company would have wanted even as the success of Model 3 helped propel Tesla’s sales as well as its share price higher.
During the Q3 2023 earnings call, General Motors CEO Mary Barra said “Our strategy is to build — is to build on the tremendous equity we have in the brand and to do it as efficiently as possible.”
She added, “by leveraging the best attributes of today’s Bolt EUV, as well as Ultium platform, our software, and NACS, we will deliver an even better driving, charging, and ownership experience with a vehicle we know customers love.”
Barra said that the unit costs of the new Bolt EV would be “substantially lower” and in the process, we are saving billions in capital and engineering expenses, delivering a significantly cost improved battery pack using purchased LFP cells. We are getting to market at least two years faster.”
GM is also laying off 369 workers at the Lansing Grand River Assembly/Stamping as the company would cease producing Camaro at the plant.
“As a result, about 350 employees will be affected beginning Jan. 2. GM anticipates having job opportunities for all impacted team members per the provisions of the UAW-GM National Agreement,” said General Motors in its release.
General Motors to retool Orion plant
Meanwhile, GM would retool the Orion plant to produce EVs and the facility is expected to resume production towards the end of 2025. Notably, automakers have gone cautious on the ambitious EV plans and General Motors is also scaling back investments and would not go forward with the proposed EV joint venture with Honda Motors to produce small electric cars.
Ford too is going slow on its EV investments amid lower-than-expected sales and rising losses. Ford expects its electric vehicle (EV) business to lose $4.5 billion in 2023 which is 50% higher than its previous forecast. The company also scaled back its EV production targets and said that it now expects to hit an annual EV production capacity of 600,000 EVs only by 2024 versus the previous guidance of 2023.
As for the 2 million EV production guidance by 2026, the automaker said, “we maintain flexibility on where we reach when we reach two million total EV global capacity because we are balancing growth, profitability, and returns.”
Cruise to layoff employees
Separately, General Motors’ autonomous driving subsidiary Cruise is also laying off 900 employees which is around a quarter of its workforce. The move comes after the company had to halt autonomous driving trips after an accident in early October.
In its statement, Cruise said, “We shared the difficult news that we are reducing our workforce, primarily in commercial operations and related corporate functions. These changes reflect our decision to focus on more deliberate commercialization plans with safety as our north star. We are supporting impacted Cruisers with strong severance and benefits packages and are grateful to the departing employees who played important roles in building Cruise and supporting our mission.”
GM-UAW deal to cost billions of dollars
While the Big 3 Detroit automakers managed to strike a deal with striking UAW workers, the revised contracts would mean billions of dollars in additional costs. General Motors expects additional costs of $9.3 billion until 2028 which would mean an additional cost of $575 per vehicle.
Meanwhile, amid its sagging share price, GM announced a $10 billion share buyback and also increased its 2024 dividend. In her prepared remarks, Barra said, “We are finalizing a 2024 budget that will fully offset the incremental costs of our new labor agreements and the long-term plan we are executing includes reducing the capital intensity of the business, developing products even more efficiently, and further reducing our fixed and variable costs,”
She added, “With this clear path forward, and our strong balance sheet, we will return significant capital to shareholders.”
GM shares surged after the company announced the massive buyback. However, the shares could not continue their momentum. Also, despite the surge, the shares are in the red this year even as broader markets have given double-digit returns.
While General Motors’ EV sales have risen it still has a single-digit market share. Tesla still holds the pole position in the US EV market and leads the competition by a wide margin. That said, the company has had to lower vehicle prices to spur sales.
Tesla has started an EV price war and has lowered car prices multiple times. Due to the frequent price cuts, its operating margins have fallen to single digits. While its margins are still among the highest globally, they are now less than half of what they were before the price war.