In a bid to operate more efficiently and to cater for consumer demand, General Motors has announced plans to close seven different plants across the world. Five of these are in North America, while the location of the two remaining plants set to close is yet to be released.

Capacity utilisation

Source: GM

Source: GM

"In the past four years, GM has refocused capital and resources to support the growth of its crossovers, SUVs and trucks, adding shifts and investing $6.6 billion in US plants that have created or maintained 17,600 jobs," the company said in a statement. "With changing customer preferences in the US and in response to market-related volume declines in cars, future products will be allocated to fewer plants next year."

The plant closures will undoubtedly result in job losses - 15% of salaried and contract staff as well as 25% of the company's executives. Around 2,500 people currently work at the Oshawa plant, 1,500 at Detroit-Hamtramck, 1,600 at Lordstown, 1,000 at Warren Transmission Operations and 310 at Baltimore Operations.

The news has been met with outrage from unions representing the workers. Investors, on the other hand, are likely welcoming it after seeing stock rise dramatically.

GM's CEO Mary Barra stated: "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 recognise the need to stay in front of changing market conditions and customer preferences to position our company for long-term success."

Back tracking

By shutting the seven plants down, GM hopes to utilise capacity at its other plants that will remain open. It will likely consolidate the production of individual models rather than making the same car at numerous different plants. For example, the Chevrolet Cruze is made at Lordstown Assembly in Warren as well as in Coahuila, Mexico. The former is set to close, so production of the Cruze could shift to Mexico.

However, back in January 2017, GM said it was taking steps to move work from Mexico to the US, such as insourcing axle production for its next generation pick-ups. It also promised to invest $1 billion in US manufacturing operations to ready its plants for the production of new vehicles and components.

News of the seven plant closures comes soon after GM shut an assembly plant in Gunsan, Korea, where the Chevrolet Cruze and Orlando were made. The facility opened back in 1995 and employed around 2,000 workers. It had been running at about 20% capacity since 2015, making continued operation unsustainable.

But it hasn't been all doom and gloom at GM. The company recently announced that it was increasing production of the Bolt EV at its Orion Assembly plant in Michigan. It also added a third shift to its Spring Hill plant in Tennessee after witnessing growing demand for the GMC Acadia and Cadillac XT5.