General Motors announces 15,000 job cuts
Wall Street likes the news
San José, CA – On Monday, November 26, General Motors announced that it was cutting 15,000 jobs. Their plans include closing five auto and auto parts plants in the United States and Canada. Wall Street liked the news, and GM’s stock rose almost 5%, three times as much as the broader stock market. But for thousands of GM workers, the holidays suddenly became much bleaker.
General Motors is not losing money as it was ten years ago, when it was bailed out by the U.S. government. The GM bailout cost U.S. taxpayers about $9 billion. In the last quarter (July to September), GM’s North American operations made more than $2.8 billion, 37% more than a year ago. But these profits are not enough, and the job cuts will save GM billions of dollars in the future.
GM said that the reason was slow car sales for three brands that is phasing out: Cruze, Volt and Impala. Fiat-Chrysler, Ford, and now General Motors are all phasing out their production of cars to focus on more profitable SUVs and pick-up trucks. The so-called Detroit “Big Three” are leaving the car market to imports and to foreign auto-makers that have set up plants in the United States.
These automotive job cuts are another sign of a slowing economy. The housing market is struggling with higher interest rates. Falling oil prices point towards fewer jobs and less investment in the growing production of U.S. oil. Economic growth is slowing in much of the world, with the economies of Germany and Japan actually shrinking in the July to September quarter. Last but not least, recent jitters in the U.S. stock market a showing growing doubts about the future of the economy.