GM’s Next Big Cuts May Come From North American Cars
General Motors calls its decision to sell the Opel and Vauxhall brands to PSA Group an indicator of its plans to improve profits by getting smaller. According to Mary Barra, there is likely more consolidation on the horizon for GM, and that may include cuts to North American cars.
“There’s a little bit more work that we’re doing in the international markets,” Barra told reporters during a conference call last week. “Our overall philosophy is that every country, every market segment has to earn its cost of capital.”
According to Automotive News, two avenues for cost-cutting that General Motors could pursue were outlined in a chart that accompanied a conference call discussing the Opel sale: “select” international markets and North American cars. With regards to the aforementioned “select” markets, Auto News suggest further cuts for markets like Russia, Thailand, and India, where operations have already been scaled back significantly as the result of financial difficulties.
While Auto News notes that the South American market has seen losses and will likely continue to see losses with its economic struggles, it is “earmarked for increased investment, because management has categorized its franchise value in that market as high.”
With car sales declining in the United States as consumers increasingly turn to pickups and SUVs/crossovers, there also exists the distinct possibility that Chevrolet, Buick, and Cadillac car production will be scaled back a great deal. Automotive News reports that, as of March 1st, there were approximately four months’ worth of car inventory on dealership lots compared to an 81-day supply of light trucks and less than a 60-day supply of full-size SUVs.
It’s insinuated that GM could significantly cut production of or even outright stop making small cars and full-size sedan: the Buick Verano and Chevrolet SS are both being phased out in the United States, sales of the subcompact Sonic are down 47% while sales of both the Spark and Trax surge, and the Chevy Impala and Buick LaCrosse are both seeing major sales declines despite the former being named Consumer Reports’ Best Large Sedan for a third consecutive year and the latter entering a new generation for the 2017 model year.
Alternatively, Automotive News suggests that GM may just cut costs on these and other unprofitable cars by drawing out the time between generational upgrades. With many Buick vehicles being based on current Opel models, General Motors would have an in-built excuse to delay updating them until after PSA has instituted its own platforms.
GM President Dan Ammann seemed to confirm as much, saying, “We expect those architectures to carry us far into the future.” Neither he nor Barra would provide any additional elaboration as far as where cuts might come.
News Source: Automotive News (subscription news)
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