What happened
Shares of General Motors (GM -0.09%) moved sharply higher on Monday, after GM announced a sweeping restructuring of its North American operations in a bid to boost its free cash flow.
As of 3 p.m. EST on Monday, GM's shares were trading at $38.01, up 4.2% from Friday's close.
GM's Detroit-Hamtramck assembly plant builds the Chevrolet Volt and several other sedan models. It's one of 5 GM factories in North America that will be idled by the end of 2019, GM said on Monday. Image source: General Motors.
So what
Here are the key points of GM's overhaul plan:
- 5 North American factories will be idled, including those that make the Chevrolet Volt, Cruze, and Impala; the Buick LaCrosse, and the Cadillac CT6 sedan. It's likely that all of those models will be cut from GM's U.S. lineup. About 6,300 workers in the U.S. and Canada will be affected. (It's not yet clear whether all of those factories will be permanently closed.)
- 2 more factories outside North America will be closed by the end of 2019. (Those haven't been named yet.)
- GM will also cut 15% of its salaried workforce in North America, or about 8,100 jobs, including 25% of its executives in the region.
- The company is reorganizing its product-development and engineering teams to reduce new-model development costs and bring new products to market more quickly.
- Over the next 2 years, GM will double the resources it has allocated to electric-vehicle and autonomous-driving development.
GM expects that the restructuring will cost about $2 billion in cash (mostly for severance payments), while yielding savings of about $6 billion a year by the end of 2020.
Now what
CEO Mary Barra said that GM will continue to maintain its internal-combustion truck, SUV, and crossover models, but that it will now prioritize investments in its upcoming range of electric vehicles.
GM has promised to share more details about the plan and its likely effects at its annual investor briefing in January.
