On the 26th of November, GM Chief Executive Officer Mary Barra announced it was changing and shut down 5 North America factories and reduce its head office count, the plants would shut down in 2019, it people terms 15,000 employees will be affected.
Many will recall GM received an aid package from the government, do you remember why? In the book Autonomy by Lawrence Burns, GM ran out of cash from losing a $ 1 billion a month on lower sales. In 2007, GM sold 9.369 million vehicles out of the US market of 15 to 17 million vehicles. In 2008 the total sales were 10.4 million vehicles and GM had a cash reserve of $25 billion and when it went to below $10 billion bankruptcy would be in order. The cash went below and GM needed money from Presidents Bush and Obama because the vehicle market fell to half of normal.
The company announced the industry is changing rapidly and GM is doing these things to strengthen core business. The company will focus on trucks, SUVs and electric cars. The industry is still profitable but times are a changing as sales in the US should be 17 million vehicles down from 17.5 million vehicles.
In 2017, GM made a profit of 8 cents on the dollar for every dollar of sales. In the last quarter, GM reported a net profit of $2.53 billion or $1.87 a share.
Linking to dividend paying stocks, for many years having an auto plant in your community was a sign of a healthy community for the auto plant paid well and absorbed many young people. Things were going to change for example, the number of parts used in an internal combustion engine is 25,000 while the same vehicle as electric is less than 2,500. This suggests changes would be coming soon. Nobody likes to see auto manufacturing plants close, but as an investor you are investing for the health of the overall economy not particular plants.
There are more questions than answers, till the next time – to raising questions.