The CEO of General Motors, Mary Barra had to spend a couple of days at capital city Washington to reduce criticism of lawmakers and make them understand her firm’s decision to close down five production units in North America that would lead to loss of nearly 15000 jobs. The situation has become complicated as GM has decided to produce its promising new SUV model at its production unit in Mexico while its rival Fiat Chrysler is setting up a new Jeep plant in Detroit. Speaking on the situation Senator Gary Peter of Michigan stated that GM’s argument about excess capacity in United States is largely due to new production facility in Mexico.
General Motors announced its decision to close down assembly units towards end of November in Ohio, Michigan and Ontario along with two operations in Baltimore and Detroit that would directly impact 6700 factory workers. Its second cost cutting measure that will affect 15 % salaried staff would lead to 8700 employees losing their jobs. The automaker pointed to situations that have led to this decision namely shift in demand for passenger cars to light trucks in US market. It said that sales of traditional car models have fallen by 30.5 % and sales of pickups, SUV and crossovers have grown from 48.3 % to nearly 69.5 % between 2008 to now.
To meet this demand GM will stop production of six sedan models that were being produced at these plants and will concentrate on launching production of new SUV Chevy Blazer at Mexico. This was because in recent years Mexico has undergone tremendous growth in its automobile sector due to twin advantage of low wages and several free trade deals that make it a valuable export location. GM has invested around $5 billion in its operations at Mexico since 2014 and is pulling out of non-profitable ventures in US, India, Russia and even South Africa.