Cutbacks in Korea, Australia planned. Expansion set for US manufacturing.
News from General Motors continues to dominate the auto industry, trumping its competitors’ new product introductions. That Mary Barra will ascend to GM’s top office in 2014 is big news, what overshadows the, “is he going to Microsoft or staying put?,” chatter about Ford’s Alan Mulally.
All that suits GM just find because as it leaves government ownership and stewardship in its rear view mirror and focuses on its future, it can finally move forward on several matters it likely has had to put off handling until the federal government sold its remaining shares in the automaker. Those matters are not minor issues either and include the following news stories:
Opel to Trump Chevrolet
The recent news wave began prior to the Akerson/Barra announcement. GM said that it was pulling back its Chevrolet Europe strategy to focus on Opel. Although GM admitted defeat, it likely won itself much needed and desired support in Europe where Opel and Vauxhall are its main products — home grown ones at that.
Chevrolet entered Europe in 2005 and has lost money since. It won’t be a complete abandonment, however, as select Chevrolet models such as Corvette will still be offered. Moreover, Russia will remain an important market for the bow tie brand.
Korean Manufacturing Scaled Back
Korea is an important market for GM and has been since the automaker took over the country’s third largest automaker, Daewoo, in 2001. It was one of the few very good financial decisions GM made leading up to its 2009 bankruptcy and restructuring, a company since renamed GM Korea.
GM Korea supplies the Chevrolet Spark to the US market and also builds Chevrolet models for Europe. But with GM cutting back its Chevrolet exposure across much of the western part of the continent, the automaker has said that it will scale back Korean manufacturing. Indeed, this week GM announced that it would offer up a voluntary retirement for up to 6,000 salaried workers by the end of March reports Fox News. The company says that it expects to reduce its Korean manufacturing by 20 percent to reflect its new strategy for Chevrolet Europe.
Peugeot Stake Sold
One of the worst decisions GM made post-bankruptcy was to secure an alliance with PSA Peugeot Citroen, the beleaguered French automaker. Not just an alliance, but it also took a financial stake worth hundreds of millions of dollars. That 7 percent stake is now gone as GM sold its shares in Peugeot this week.
The two companies say that they plan to continue collaboration on new product, but if Peugeot fails then GM should be able to walk away relatively unscathed. So much for a strategic alliance.
GM Exits Ally
The company once known as the General Motors Acceptance Corporation (GMAC) and now called Ally Financial, had long played a role in helping GM car buyers get auto financing. GM separated GMAC from its own operation in 2006, but most of its business remained with GM. When GM began its slide into bankruptcy, GMAC applied to become a bank holding company.
Later, GM gave most of its new car financing business to AmeriCredit, renamed GM Financial. It still held an 8.5 percent stake in Ally, but sold its shares on Dec. 11, 2013, for $900 million. “This transaction releases capital from a non-core asset and further enhances our financial flexibility,” said Dan Ammann, GM executive vice president and chief financial officer. “Ally continues to play an important role in financing our dealers and customers in the United States.”
Holden Manufacturing to Halt
Will we soon see an end to the beautiful cars imported from Australia that we have come to know and love? Those models currently include the Chevrolet SS and the Chevrolet Caprice SS, based on the Holden Commodore. They aren’t the first Holden-supplied models, with the Pontiac GTO and G8 starting the Aussie onslaught, disappearing as Pontiac was closed down.
GM says that it will stop making cars in Australia by the end of 2013, relying on imports beginning in 2018 to supply its Australian customers. GM, citing costs, will close down its one manufacturing and one engine plant. The company insists that it will keep the Holden brand alive. “Australians have been driving Holden vehicles for decades – and we are determined that Australians will drive Holden vehicles for many years to come,” Mr Devereux said. The high cost of doing business in Australia is behind GM’s decision.
Updated Manufacturing and Jobs in the US
With GM cutting back jobs abroad — pulling Chevrolet out of Europe and divesting itself of financial stakes in Peugeot and Ally Financial — it may seem that the automaker is seeking to conserve cash. However, that recently expanded largesse will soon be tapped to pay for a planned $1.3 billion investment in five manufacturing plants — three in Michigan and one each in Indiana and Ohio. GM says that the move will create or retain about 1,000 jobs.
The investment will pay for retooling to support production of an existing 6-speed transmission, a new 10-speed transmission, and the building of a new V-6 engine. The funds will also pay for plant upgrades as well as for a new paint shop and logistics optimization center.
“GM is committed to a strong American manufacturing base and creating jobs in dozens of communities throughout the country. Today’s announced plant upgrades continue the momentum of a resurgent auto industry,” said GM Executive Vice President and North America President Mark Reuss. “More importantly, these investments add up to higher quality and more fuel-efficient vehicles for our customers.”
But, Wait…There is More!
With Dan Akerson leaving and Mary Barra’s ascendancy timed to coincide with the start of the 2014 North American International Auto Show (NAIAS) in Detroit, GM also won’t miss out on a major media opportunity to showcase one or more new cars as it parades Barra before the media.
We already know that the Cadillac ATS Coupe will be revealed, but might we also learn the status for another new product that has everyone talking? That would be the Cadillac Elmiraj, a beautiful full-bodied coupe that made its debut at the 2013 Pebble Beach Concours d’Elegance. It is the latest super concept for the Cadillac brand and the one that many enthusiasts hope Cadillac decides to build. Yes, the Detroit auto show would present the ideal place to showcase this $100K+ luxury coupe, providing perhaps the best send off for Akerson and a hand off of company leadership to Barra.