By: Dr. Ashley Nunes
This week, General Motors announced plans to halt production at several of its plants. The move could see over 14,000 jobs lost, 8,000 of which are in North America. GM chief executive Mary Barra told reporters that while the company doesn’t foresee an economic downturn, the cuts are needed to “get in front of it while the company is strong and while the economy is strong.” Wall Street reaction was positive, with GM stock rising sharply.
1. What’s behind the move?
It comes down to cash. Consumer preferences have changed in recent years, with Americans increasingly opting for larger sports utility vehicles and vans over smaller sedans and coupes. Larger vehicles command higher prices, even though they don’t cost much more to build. Automakers know this and are keen to cash in by ditching production of slow-selling smaller vehicles and switching to their larger and more lucrative counterparts.