GM to ‘rip off the Band Aid and significantly cut costs’ by laying off 1,300 workers amid its transition to EVs

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General Motors plans to lay off 1,300 workers after deciding to end production of two of its models. The Orion Assembly plant in Orion Township, Mich., will bear the brunt of the cuts, with 945 workers facing layoffs as the facility winds down production of the Chevrolet Bolt and will be retooled to manufacture electric trucks. Another 369 employees at the Lansing Grand River Assembly plant, in Lansing, Mich., will also lose their job as production of the Camaro, a muscle car synonymous with Detroit’s golden age, sunsets. GM had previously announced it would end production of the Camaro in January 2024, before deciding to end production about a month earlier in December. 

The news comes as GM, like many automakers, grapples with the seismic shift toward electric vehicles. GM CEO Mary Barra’s plans to turn around the company hinges on a successful transition to electric vehicle manufacturing, which she reiterated during a press event this month. The company’s strategy, however, has been hampered by stagnant demand for electric vehicles and rising costs to produce them. In fact, the Orion plant, which is being refurbished for electric trucks, won’t be operational until 2025, as the company tries to figure out how to make them at a lower cost

“Barra and the team have to rip the Band Aid off and significantly cut costs in areas that might not pan out like expected,” Wedbush analyst Dan Ives told Fortune

Not all analysts see these job cuts as results of belt tightening. The Lansing layoffs came as a result of the plans to end production of the Camaro, which were in March, before the industry was hit with a strike that cost GM $200 million a week, and would have happened “regardless of what else is going on” in the industry, according to David Whiston, an auto industry analyst at Morningstar Research. Official word of the layoffs came last month, according to a notice GM filed with Michigan’s Department of Labor and Economic Opportunity.

Some of the workers laid off at both facilities could possibly rejoin GM at a different location, a GM spokesperson told Fortune

GM’s relationship with its workers was at the fore of the United Auto Workers strike earlier this year. The strike affected all the so-called Big Three auto manufacturers, which also include Stellantis and Ford. In November, the UAW ratified the new labor agreement with GM after a 55% to 45% vote in favor of the deal. The new contract, which runs through April 2028, guaranteed workers a 25% increase to their base wage. GM estimated the contract would raise its costs by $9.3 billion over the length of the agreement, averaging to a $575 increase per vehicle. 

The new labor agreement added “25% to 30% costs from a labor perspective into their infrastructure,” Ives says. “Investors don’t want to see that come out of the bottom line. They’d rather [GM] cut costs to preserve profitability and margin targets.”

Whiston says the new contract only played a minimal role in these decisions. “GM’s moves are to help offset higher labor costs from the new UAW contract, but even without the contract, cost reduction is critical for GM and other legacy OEMs as they transition to EVs and compete with Tesla’s cost advantage,” he said. 

This week GM also announced layoffs of about a quarter of the workforce, or roughly 900 employees, from its Cruise division, which was working on self-driving cars. Cruise, which has a robotaxi service in San Francisco, has been hit with a slew of struggles since GM acquired it for $1 billion in 2016. The once-promising startup was involved in an October car accident that left a woman severely injured. In the aftermath, executives failed to fully disclose the details of the accident when it was investigated by the California DMV. In November, Cruise CEO Kyle Vogt resigned. “Cruise was the golden child, now it’s been a black eye,” Ives said. 

Employees remaining at GM’s corporate offices might find the company becoming less flexible moving forward. Earlier this week, Barra sent employees an email reprimanding them for not having adhered closely enough to the company’s policy of being in the office three days a week. “We are now explicitly requesting hybrid employees to be onsite beginning Jan. 8, every Tuesday, Wednesday, Thursday at minimum,” the email read.

Whiston said he saw little connection between the impending factory layoffs and GM’s stricter return to office policy. Ives, on the other hand, argued it as an attempt to unify the company, as it prepares to undergo a critical transition. “It’s talking the talk, but then walking the walk from a corporate perspective,” he said. “Your factory workers can’t work from home. Culturally it was the right move.”  

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