11/26/2018

General Motors Co plans to announce as early as Monday it will significantly cut car production in North America and stop building some low-selling car models, a source briefed on the matter said.

GM plans to announce a broader restructuring of its efforts as it shifts more of its focus toward electrified and autonomous vehicles, the source said.

GM declined to comment ahead of an expected announcement at mid-morning.

Cost pressures on GM and other automakers and suppliers have increased as demand has waned for traditional sedans. The company also has said tariffs on imported steel, imposed earlier this year by the Trump administration, have cost it $1 billion.

The decision comes as the largest U.S. automaker is poised to idle an assembly plant in Canada. A Canadian union, Unifor, which represents most unionized autoworkers in Canada, said on Sunday it had been informed by GM that there would be no product allocated to the plant in Oshawa after December 2019.

GM employs about 2,500 union staff in Oshawa, which produces both the Chevrolet Impala and Cadillac XTS sedans. It also completes final assembly of the stronger-selling Silverado and Sierra pickup trucks, shipped from Indiana.

GM has internally debated for months how to address shrinking car demand, a person briefed on the matter said, and the issue is certain to re-emerge when GM holds contract talks next year with the United Auto Workers (UAW) union.

GM has begun what is expected to be a long and expensive transition to a new transportation model that embraces electrified and automated vehicles, many of which will be shared rather than owned.

The No. 1 U.S. automaker signaled the latest belt-tightening in late October when it offered buyouts to 50,000 salaried employees in North America.

Lagging U.S. car sales has seen several car plants fall to just one shift, including its Detroit Hamtramck Assembly plant and Lordstown, Ohio, assembly plant.

Rivals Ford Motor Co and Fiat Chrysler Automobiles NV, have both curtailed U.S. car production. Ford said in April it planned to stop building nearly all cars in North America.

SLUMPING U.S. SEDAN SALES

The shift in U.S. consumer preference away from passenger cars in favor of larger, more comfortable SUVs and pickup trucks has been swift and severe, leaving automakers scrambling to readjust.

As recently as 2012, passenger cars made up more than 50 percent of all U.S. new vehicle sales. Through the first nine months of 2018, that had fallen to a little over 31 percent.

More than 16 months ago, the UAW confirmed that it was discussing with GM the potential threat to plants and jobs from slumping U.S. sedan sales.

“We are talking to (GM) right now about the products that they currently have” at underused car plants such as Hamtramck in Michigan and Lordstown in Ohio, and whether they might be replaced with newer, more popular vehicles such as crossovers, said then-UAW President Dennis Williams.

At the time, GM was reviewing whether to cancel at least six passenger cars in the U.S. market after 2020, including the Chevrolet Volt hybrid, Buick LaCrosse, Cadillac CT6, Cadillac XTS, Chevrolet Impala and Chevrolet Sonic, according to sources familiar with the review.

Impala, which is built at Oshawa and Hamtramck, was down 13 percent.

Buick LaCrosse and Cadillac CT6, which are built at Hamtramck, were down 14 percent and 11 percent, respectively.

Reuters (Reporting by David Shepardson, Paul Lienert, additional reporting by Nick Carey; Writing by Nick Zieminski; Editing by Susan Thomas)