GM deals with political blowback as they push toward an autonomous and sedan-less future

 CEO Mary Barra discusses the battery-powered Bolt at a trade show in January 2015. The Bolt is one of the few smaller cars GM is sticking with.  (Photo: Shutterstock)

CEO Mary Barra discusses the battery-powered Bolt at a trade show in January 2015. The Bolt is one of the few smaller cars GM is sticking with. (Photo: Shutterstock)

General Motors (NYSE: GE) chairman and CEO Mary Barra will meet Wednesday with Ohio senators Sherrod Brown (Dem) and Robert Portman (Rep) on Capitol Hill to discuss the recent decision to effectively close four U.S. plants over the coming months. She is also scheduled to meet on Wednesday with members of Maryland’s congressional delegation at the request of the lawmakers. That is according to a spokeswoman for Rep. C.A. Dutch Ruppersberger, the Baltimore County Democrat, and one of six delegation members who signed a letter Monday to the company, according to the Baltimore Sun.

The White Marsh transmission and electric motor plant, which is in Ruppersberger’s district, employs an estimated 300 people. Workers there were told a week ago that the plant will not receive any new work after April. Maryland’s federal, state, and local lawmakers said GM gave them no warning about the decision. They call the decision to end operations at its White Marsh plant "extremely poor corporate citizenship.” The move was, in fact, said to be a well-kept secret, and probably signals more to come. 

“We believe that White Marsh’s highly skilled workforce, modern facility and experience with production lines, from electric motors to transmissions, can and should be repurposed to meet GM’s new business objectives,” the Maryland lawmaker’s letter said. Closing a productive plant, especially when the company has received “significant public assistance” and reported healthy Q3 profits, “is an example of extremely poor corporate citizenship.” The letter was signed by Ruppersberger, U.S. Sens. Ben Cardin and Chris Van Hollen and Reps. Elijah Cummings, John Sarbanes and Jamie Raskin, all Maryland Democrats.

The move is a small part of a massive restructuring of the 110-year-old GM. The company claims it needs to continue taking 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, $1.5 billion of which comes from reduced operational costs.

The rhetoric the lawmakers are likely to hear are variations on a theme riffing off what Barra said in a statement last week: “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. We recognize the need to stay in front of changing market conditions and customer preferences to position our company for long-term success.”

Besides moving toward a leaner and meaner operational production, there is also the issue of a clear and unprecedented decline in sedan demand. GM is shifting more resources to light trucks, crossovers, SUVs, and electric vehicles. GM is still keeping smaller models such as the Chevy Malibu, Chevy Bolt, Cadillac CTS, and Buick Regal.

Even the semi-electric Volt that debuted a decade ago is on the chopping block. GM sang the praises of the Volt for years as a symbol of its innovation. The company now wants to move toward fully battery-powered cars, such as the Chevy Bolt. Like the Volt, the Cruze was also described for years as an illustration of GM's recovery after its federal bailout and bankruptcy. GM's decision to locate Cruze production in Ohio breathed new life into the Lordstown plant was hailed by President Obama's administration as a signal of the auto industry's revival.

What our SONAR data is showing us, however, is a precipitous decline in production at the Lordstown plant. It’s not that the workers suddenly stopped working as efficiently, it’s simply the case that demand for what they’re producing is down. In fact, over the past two years production is down 60%. It can be hard to argue with the bottom line, especially if that line is getting progressively lower.

 SONAR data from Cleveland (the Lordstown plant) indicates a clear production trend line downwards.

SONAR data from Cleveland (the Lordstown plant) indicates a clear production trend line downwards.

If staying healthy in the car manufacturing industry and supply chain labor force wasn’t complicated enough, there is still the matter of the $51 billion bailout that the American taxpayer paid to save GM a decade ago. That seems to be the tack that the lawmakers will take on Wednesday.

President Trump said he was "very tough" on Barra in a one-on-one conversation about the decision. "This country has done a lot for General Motors," Trump said as he departed the White House for a series of campaign events in Mississippi. "They better get back to Ohio and soon. So we have a lot of pressure on them."

He also tweeted his disapproval.

“Very disappointed with General Motors and their CEO, Mary Barra, for closing plants in Ohio, Michigan and Maryland,” he wrote. “Nothing being closed in Mexico & China. The U.S. saved General Motors, and this is the THANKS we get! We are now looking at cutting all @GMsubsidies, including….. ….for electric cars. General Motors made a big China bet years ago when they built plants there (and in Mexico) - don’t think that bet is going to pay off. I am here to protect America’s Workers!”

It's a "callous decision" to cut American operations about 10 years after the automaker first accepted federal bailout money, UAW GM official Terry Dittes said in a statement.

“GM’s production decisions, in light of employee concessions during the economic downturn and a taxpayer bailout from bankruptcy, puts profits before the working families of this country whose personal sacrifices stood with GM during those dark days," Dittes said. "These decisions are a slap in the face to the memory and recall of that historical American made bailout.”

GM’s cost-cutting measures coincide simultaneously with announcements about where they are directing their future efforts. GM and Cruise (not to be confused with Cruze) are taking the next step toward commercializing autonomous vehicle technology with the appointment of Dan Ammann as CEO of Cruise. Kyle Vogt, Cruise co-founder, will partner with Ammann to set strategic direction for the company and will lead technology development as Cruise president and chief technology officer.

Under Vogt’s leadership, Cruise has emerged as an industry leader in autonomous vehicle technology, growing from 40 employees to more than 1,000 at its San Francisco headquarters and recently announced an additional expansion of 100-200 employees in Seattle. With recent investments by SoftBank and Honda, Cruise’s valuation has rapidly grown to $14.6 billion.

“These appointments further demonstrate our commitment to transforming mobility through the safe deployment of self-driving technology and move us closer to our vision for a future with zero crashes, zero emissions and zero congestion,” said GM Chairman and CEO Mary Barra. “As we move toward commercial deployment, adding Dan to the strong team led by Kyle is the next step.”

With Ammann’s appointment, GM’s global regions and GM Financial will now report directly to Mary Barra, and for this week at least Barra will report to Capitol Hill.