- General Motors on Monday announced plans to halt production at seven factories globally and to r educe the size of its workforce by 15%.
- The Trump administration blasted GM’s plans to shut down plants and lay off workers.
- GM’s restructuring plan is necessary to ensure it will be a winner in Auto 2.0, said Morgan Stanley.
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General Motors‘ plan to significantly shrink capacity and its headcount is a smart decision for the company’s long-term sustainability, Morgan Stanley says.
“Many investors pitch GM as a winner in Auto 2.0.,” Adam Jonas, an analyst at Morgan Stanley, said in a note sent out to clients on Monday.
“We believe today’s(Monday’s) move is meant to finance such a move in a sustainable way through the cycle.”
The automaker on Monday announced plans to shut down seven plants globally in 2019, including three assembly plants in North America, two US transmission plants, and two additional, unnamed assembly plants outside the US. GM also said it will slash its salaried employee headcount by 15% next year, including a 25% cut in its white-collar staff.
The moves are intended to shift resources to investing in electric and autonomous vehicles and to prepare for a downturn in the auto market, the automaker said.
GM’s restructuring proposal was blasted by the Trump administration. Larry Kudlow, President Donald Trump’s top economic adviser, said Tuesday that the administration felt “disappointment maybe even spilling over into anger” over the announcement.
Trump himself made a similar comment on Tuesday and threatened to slash GM’s subsidies if a new plant in Ohio was not opened shortly to replace the one that slated to close.
“Very disappointed with General Motors and their CEO, Mary Barra, for closing plants in Ohio, Michigan and Maryland,” Trump tweeted Tuesday. The US saved General Motors, and this is the THANKS we get! We are now looking at cutting all @GM subsidies, including for electric cars.”
GM is targeting $US6 billion of cash run-rate savings by the end of 2020 after these adjustments.
Jonas has a price target of $US44 for GM shares – 20% above where they were trading Tuesday.
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