Yesterday, General Motors announced plans to lay off 14k workers, close 5 facilities, and discontinue several sedan models in order to prioritize electric and self-driving cars.
GM’s restructuring comes just a few months after Ford decided to cease production of most of its cars.
A new model for Big Auto
By cutting costs, GM hopes to save $6B by 2020. So, despite the layoffs, GM still plans to double the amount it spends on electric and self-driving cars over the next 2 years.
So far, GM has invested in self-driving cars primarily by acquiring budding startups.
But Cruise, the $1B startup acquired by GM in 2016 that now forms the backbone of the automaker’s autonomous operation, had just 40 employees when it was swallowed — and other potential acquisitions are unlikely to make up for the jobs slashed.
Fewer people driving cars, fewer people making cars
GM’s so-called “right-sizing” involves axing 15% of its workforce (including 25% of its executives).
The decision to shut down production of slow-selling sedans (which have become unpopular due to favorable gas prices) to focus instead on electric crossovers, SUVs, and trucks garnered criticism from politicians in both the US and Canada.
Some workers walked out of their death-sentenced factories as soon as they heard the news. But at least one group is pleased: GM investors. After the announcement, GM’s stock rose more than 7%.