Politicians are far from happy about General Motors’ proposal for a $6 billion restructuring that includes layoffs and the possibility of closing production facilities. It’s bad PR for the automaker that’s being dragged through the mud by politicians who made promises they have no power to keep. Former GM Vice Chairman Bob Lutz called GM’s proposal, “not silly at all,” and former GM CEO and Chairman Dan Akerson echoed a similar sentiment on CNBC.
“Fundamentally, the industry is oversupplied right now,” Akerson said, noting some GM facilities in the U.S. are operating at 70-71 percent capacity, which isn’t good business. “It’s more complicated than one might think,” he added.
And he’s right.
GM’s decision to discontinue the Cadillac CT6, Cadillac XTS, Chevrolet Impala, Chevrolet Cruze, Chevrolet Volt, and Buick LaCrosse isn’t arbitrary. Sales for sedans have dropped heavily in every segment, and American automakers have been hit the hardest. Akerson noted that five years ago, sedans made up about 50-60 percent of all new-car sales. Today, that number is closer to 25-30 percent. Over the same period, SUVs, crossovers, and trucks went from about 50 percent of the market to 70 percent.
“The consumer is driving these numbers,” Akerson added. “You need free cash flow in order to fund the future of the company. They need to become a leaner, faster, more responsive company.”
There’s a monumental shift within the automaker, which is trying to predict future consumer trends. Not only are consumers flocking to crossovers, SUVs, and pickups, but urban residents are asking for new ownership models, too. Ride-sharing services such as Maven, Uber, and Lyft are flourishing right now as Millennials begin needing transportation while lacking the funds to own a personal vehicle. Akerson noted that this sort of restructuring is something the old GM wouldn’t do. The company is trying to anticipate change and is trying to do so before new-car sales slump, which is also forecasted.
The decisions GM is making aren’t easy. They affect real people who have real-world responsibilities. If GM doesn’t adapt to a changing marketplace, as it did in the early 2000s, it could easily face financial difficulty or even bankruptcy again. As Dan Akerson said near the close of the interview, GM is trying to do “the right thing.”