17 Dec 18

Eyeing future, Ford and GM cut production and jobs

A few weeks after Ford announced a wide-ranging restructuring effort, cutting production and jobs, General Motors has done the same. Why are the two North American manufacturing giants volunteering for such a painful process? Time for a closer look. 

In November, GM CEO Mary Barra announced a company-wide, multi-billion-dollar restructuring effort. Seven plants worldwide are slated for closure, five of which in North America. A total of 14,000 jobs in North America are under threat, or about 15% of GM’s total workforce in the region. The first major job cuts, rumoured to be in the thousands, are expected in January. 

Assembly plants
The five North American plants slated for closure in 2019 include three assembly plants and two powertrain plants and represent a total of around 6,000 manufacturing jobs. However, the brunt of GM’s restructuring effort will fall on the Global Product Group (GPG).

That department, led by Mark Reuss (55), encompasses 32,000 employees engaged in work on R&D, safety and quality research, design and engineering, and product planning. 

Reuss is charged with both ‘streamlining’ the GPG’s huge staff count while simultaneously shifting its attention towards autonomous and electric vehicles – especially battery-electrics (BEVs). In 2021, GM wants to launch a next-generation EV platform. By 2023, the company wants to have at least 20 BEV or fuel-cell-powered vehicles on the market across the world. 

Electric pivot
Reflecting the pivot towards electric, the GPG’s Global Propulsion Systems unit (formerly the GM Powertrain division) will work more closely with other product group divisions and several GPG top execs have been given additional assignments.  

However, as most consumers are still not convinced by electric vehicles, Russo will also have to update GM’s traditional range of internal combustion engine vehicles (ICEs), shifting the emphasis from cars to the increasingly popular SUV, crossover and pickup segments.

Meanwhile, GM also plans to halt production in 2019 of six models for North America (including the Cadillac CT6, the Buick LaCrosse and the Chevrolet Impala) that have accounted for 46% of its US car sales since 2012.  
Two-front war
This means Russo – and GM in general – is effectively forced to fight a war on two fronts: converting Americans to electric mobility while maintaining ICE market share. Both fights take place against the backdrop of company-wide cutbacks. It remains to be seen whether that effort will pay off equally on either front. 

Ford announced its own restructuring effort in October. The plan, at a cost of $11 billion, aims to “completely redesign” the company over the course of several years. However, investors have complained that Ford’s restructuring plan is short on details, and that is one of the reasons why the manufacturer’s stock has lost about a third of its value over the course of this year.

Investor frustrations
Ford CEO Jim Hackett has expressed understanding for investor frustrations, but said that something as momentous as changing course must be done with extreme caution. During a recent conference call, he said that “we first have to find the areas that need the attention, (and) we’re through that. We then have to design the solutions for them. We’re through a lot of that but not all of it. And then we have to put (those solutions) in place and perform.”

Judging by what’s decided, both Ford and GM have come to similar conclusions about the future of their business in North America. Ford has announced that it plans to phase out production of passenger cars in North America, favouring the more popular segments – indeed: SUVs, crossovers and pickup trucks. 

70,000 employees
Accompanying the change will be a reduction in Ford’s North American workforce, which currently stands at 70,000 employees. Details on which cuts will go into effect where and when will be announced in the second quarter of 2019. One major difference with GM: Ford has not announced a major shift towards autonomous and electric – at least not yet. 

Whether Ford’s cautiousness in redesigning itself extends to a more modest swing towards autonomous and electric than GM, or merely to a later announcement of an equally seismic shift, remains to be seen. Mr Hackett has promised more details in the weeks and months to come. What is certain, however, is that both GM and Ford realise that the future is going to look very different and that they are prepared to suffer through a painful – and largely similar – transformation exercise in order to be ready for it. 

Authored by: Frank Jacobs