Today General Motors announced a plan to close several factories and to cancel several vehicle lines, including the Chevy Volt. GM’s press release discusses several plants being closed in a realignment of the company that will eventually see GM produce more electric vehicles, and more autonomous vehicles. One of those plants is the Detroit-Hamtrack factory where the Volt is manufactured (along with the Chevy Cruze). While the press release does not discuss canceled vehicle lines, many press reports are listing the model lines GM is canceling. The Volt is one of those models.

At the same time GM is canceling the Chevy Volt, Tesla is having great success selling electric cars. Of the top 10 plug-in cars in the USA, Tesla holds the #1, #3 and #4 spots, with the Tesla Model 3 outselling the next 5 or 6 cars combined.

Current EV sales shows the Tesla Model 3 selling at a rate well over 200,000 cars per year, while the Chevy Volt is struggling to sell 15-20,000 per year.

This table shows 95,000+ Model 3 sales for 2018. But for August through through October the company maintained sales of at least 17,000 per month, making for an annualized rate of over 200,000 per year. The Volt, on the other hand, has sales steady in the 1500-2000 per month level, for an annualized rate of perhaps 20,000 Volts, and the Bolt EV has annualized sales in the same ballpark.

According to a Reuters report, GM is under pressure to reduce spending and keep up the dividend. The company hopes to reduce Capital spending to $7 billion a year by 2020, down from $8.5 billion in recent years.

At the same time, GM is hoping to transform its product lines to include several electric models by 2023.

How does GM hope to switch product lines without capital spending? How do they expect to implement manufacturing for new models with a smaller workforce? Perhaps the answer is that GM needs to preserve cash for a couple years, then ramp up new manufacturing for new vehicles starting 3-4 years from now. Another answer is that possibly GM is mismanaging itself to death?

Another issue is that tariffs imposed by the Trump Administration on imports has cost GM $1 Billion.

Speaking of Trump – he is reportedly blasting the move, demanding that GM put production of at least one vehicle into a factory in Ohio. The problem for Trump is that Ohio is key to Trump’s reelection chances in 2020, and will be tougher if there is an economic downturn for Ohio by 2020. The Lordstown plant in Warren Ohio is slated to be closed.

Other political and union leaders in both the USA and Canada are blasting GM for taking this direction.

For us who are cheering on the adoption of electric vehicles, the Chevy Volt has been one of the icons of the movement. It was the first production plug-in vehicle on sale in the USA (the Tesla Roadster does not quite count as a “production” vehicle?), and the Volt became a symbol of the move to electrified vehicles. That wasn’t always a good thing as many so-called-Conservatives blasted the Volt as being forced upon GM by President Obama (it wasn’t – since it was designed well before Obama came to office, and well before GM’s bankruptcy in 2008 which occurred before Obama came to office).

To see GM cancel the Chevy Volt is troubling. But we have to recognize the sales figures shown above are more than interesting. As a long-term trend-line, Tesla is on track to take the place of one of the major automakers in a few years.

General Motors Accelerates Transformation

Transforming the global enterprise to advance the company’s vision of Zero Crashes, Zero Emissions, Zero Congestion
Taking cost actions and optimizing capital expenditures to drive annual run-rate cash savings of approximately $6 billion by year-end 2020

DETROIT – GeneralMotors (NYSE: GM) will accelerate its transformation for the future, building on the comprehensive strategy it laid out in 2015 to strengthen its core business, capitalize on the future of personal mobility and drive significant cost efficiencies.

Today, GM is continuing to take proactive steps to improve overall business performance including the reorganization of its global product development staffs, the realignment of its manufacturing capacity and a reduction of salaried workforce. These actions are expected to increase annual adjusted automotive free cash flow by $6 billion by year-end 2020 on a run-rate basis.

“The actions we are taking today continue our transformation to be highly agile, resilient and profitable, while giving us the flexibility to invest in the future,” said GM Chairman and CEO Mary Barra. “We recognize the need to stay in front of changing market conditions and customer preferences to position our company for long-term success.”

Contributing to the cash savings of approximately $6 billion are cost reductions of $4.5 billion and a lower capital expenditure annual run rate of almost $1.5 billion. The actions include:

Transforming product development – GM is evolving its global product development workforce and processes to drive world-class levels of engineering in advanced technologies, and to improve quality and speed to market. Resources allocated to electric and autonomous vehicle programs will double in the next two years. Additional actions include:
- Increasing high-quality component sharing across the portfolio, especially those not visible and perceptible to customers.
- Expanding the use of virtual tools to lower development time and costs.
- Integrating its vehicle and propulsion engineering teams.
- Compressing its global product development campuses.
Optimizing product portfolio – GM has recently invested in newer, highly efficient vehicle architectures, especially in trucks, crossovers and SUVs. GM now intends to prioritize future vehicle investments in its next-generation battery-electric architectures. As the current vehicle portfolio is optimized, it is expected that more than 75 percent of GM’s global sales volume will come from five vehicle architectures by early next decade.
Increasing capacity utilization – In the past four years, GM has refocused capital and resources to support the growth of its crossovers, SUVs and trucks, adding shifts and investing $6.6 billion in U.S. plants that have created or maintained 17,600 jobs. With changing customer preferences in the U.S. and in response to market-related volume declines in cars, future products will be allocated to fewer plants next year.
Assembly plants that will be unallocated in 2019 include:
- Oshawa Assembly in Oshawa, Ontario, Canada.
- Detroit-Hamtramck Assembly in Detroit.
- Lordstown Assembly in Warren, Ohio.
Propulsion plants that will be unallocated in 2019 include:
- Baltimore Operations in White Marsh, Maryland.
- Warren Transmission Operations in Warren, Michigan.

In addition to the previously announced closure of the assembly plant in Gunsan, Korea, GM will cease the operations of two additional plants outside North America by the end of 2019.

These manufacturing actions are expected to significantly increase capacity utilization. To further enhance business performance, GM will continue working to improve other manufacturing costs, productivity and the competitiveness of wages and benefits.

Staffing transformation – The company is transforming its global workforce to ensure it has the right skill sets for today and the future, while driving efficiencies through the utilization of best-in-class tools. Actions are being taken to reduce salaried and salaried contract staff by 15 percent, which includes 25 percent fewer executives to streamline decision making.

Barra added, “These actions will increase the long-term profit and cash generation potential of the company and improve resilience through the cycle.”

GM expects to fund the restructuring costs through a new credit facility that will further improve the company’s strong liquidity position and enhance its financial flexibility.

GM expects to record pre-tax charges of $3.0 billion to $3.8 billion related to these actions, including up to $1.8 billion of non-cash accelerated asset write-downs and pension charges, and up to $2.0 billion of employee-related and other cash-based expenses. The majority of these charges will be considered special for EBIT-adjusted, EPS diluted-adjusted and adjusted automotive free cash flow purposes. The majority of these charges will be incurred in the fourth quarter of 2018 and first quarter of 2019, with some additional costs incurred through the remainder of 2019.

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General Motors (NYSE:GM) is committed to delivering safer, better and more sustainable ways for people to get around. General Motors, its subsidiaries and its joint venture entities sell vehicles under the Cadillac, Chevrolet, Baojun, Buick, GMC, Holden, Jiefang and Wuling brands. More information on the company and its subsidiaries, including OnStar, a global leader in vehicle safety and security services, Maven, its personal mobility brand, and Cruise, its autonomous vehicle ride-sharing company, can be found at http://www.gm.com.

Cautionary Note on Forward Looking Statements. This press release and related comments by management may include “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. We caution readers not to place undue reliance on forward-looking statements. Statements including words such as “anticipate,” “appears,” “approximately,” “believe,” “continue,” “could,” “designed,” “effect,” “estimate,” “evaluate,” “expect,” “forecast,” “goal,” “initiative,” “intend,” “may,” “objective,” “outlook,” “plan,” “potential,” “priorities,” “project,” “pursue,” “seek,” “should,” “target,” “when,” “will,” “would,” or the negative of any of those words or similar expressions to identify forward-looking statements represent our current judgment about possible future events. In making these statements we rely upon assumptions and analysis based on our experience and perception of historical trends, current conditions and expected future developments, as well as other factors we consider appropriate under the circumstances. These statements are not guarantees of future performance; they involve risks and uncertainties and actual events or results may differ materially from these statements. Potential risks and uncertainties that could cause actual results to differ from expected results include, among others, whether the Company will be able to implement the Plan as planned, whether the expected amount of the charges associated with the Plan will exceed the Company’s projections, and whether the Company will be able to realize the full amount of estimated savings from the Plan. Readers should also consult the other “risk factors” found in our Annual Report on Form 10-K for the year-ended December 31, 2017 and our subsequent filings with the U.S. Securities and Exchange Commission. We undertake no obligation to update publicly or otherwise revise any forward-looking statements, whether as a result of new information, future events or other factors that affect the subject of these statements, except where we are expressly required to do so by law.

Non-GAAP Financial Measures. See our Annual Report on Form 10-K for the fiscal year ended December 31, 2017 and our subsequent filings with the U.S. Securities and Exchange Commission for a description of certain non-GAAP measures referenced in this press release, including EBIT-adjusted, Core EBIT-adjusted, EPS-diluted-adjusted, ETR-adjusted, ROIC-adjusted and adjusted automotive free cash flow, along with a description of various uses for such measures. Our calculations of these non-GAAP measures are set forth within these reports and these measures may not be comparable to similarly titled measures of other companies due to potential differences between companies in the method of calculation. As a result, the use of these non-GAAP measures has limitations and should not be considered superior to, in isolation from, or as a substitute for, related U.S. GAAP measures.

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About David Herron

David Herron is a writer and software engineer living in Silicon Valley. He primarily writes about electric vehicles, clean energy systems, climate change, peak oil and related issues. When not writing he indulges in software projects and is sometimes employed as a software engineer. David has written for sites like PlugInCars and TorqueNews, and worked for companies like Sun Microsystems and Yahoo.