GM Slashes Workforce In Anticipation Of Economic Challenges – What's Next For The Auto Giant?

General Motors (GM) has announced layoffs affecting about 1,000 employees worldwide. The move is part of GM's effort to trim costs and tighten up operations as it tries to navigate tough economic challenges.

According to the Detroit Free Press, 507 affected people worked at the Global Technical Center in Warren, Michigan – a hub for GM's innovation and tech development. Spokesperson Kevin Kelly said in a statement to Detroit Free Press that the layoffs are part of GM's plan to streamline operations and move faster toward their goals.

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A big part of GM's focus right now is on electric vehicles (EVs), but they've hit a few bumps in the road. Cox Automotive reported that EV sales in the U.S. made up 8.9% of all vehicle sales in Q3 2024. Regarding market share, GM holds 9.8%, a far cry from Tesla's commanding 48.2%. 

To keep things in check, GM has scaled back its 2024 EV production goals from 300,000 units to somewhere between 200,000 and 250,000 units. CFO Paul Jacobson explained during a Deutsche Bank investor event that this will help them avoid overproduction and keep inventory balanced with demand.

There's also the potential loss of federal EV tax incentives, which doesn't make things easier. The $7,500 tax credit from the Inflation Reduction Act, aimed at boosting EV sales, might be rolled back under proposed Republican tax reforms. 

Reuters noted this could put the U.S. even further behind countries like China, where EVs make up 47.9% of sales. Despite potential challenges for automakers like GM, Ford, Rivian and even Tesla, CEO Elon Musk supports the move. 

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During Tesla’s Q2 2024 earnings call, Musk told Wells Fargo equity analyst Colin Langan he isn't concerned about an IRA cut’s impact. He believes Tesla's strength lies beyond EVs. “There might be some impact, but it would devastate competitors and only slightly affect Tesla,” Musk said. “Long term, it likely benefits Tesla. The value of Tesla overwhelmingly is autonomy.”

He added, “If you don't believe Tesla will solve autonomy, sell the stock. If you do, buy it. Everything else is just noise.”

Despite these challenges, GM is showing it's not all bad news. The company's Q3 2024 profits were up 10.5% from last year. According to the Detroit Free Press, Paul Jacobson credited part of this success to cost-cutting efforts and capital investments during the earnings call. 

During an interview with CNBC, Mary Barra, GM’s CEO, confidently claimed in 2021 that GM would surpass Tesla in the U.S. EV sales by 2025. Highlighting GM’s innovation, she stated customers are “wowed” by their vehicles and emphasized the company's commitment to achieving the No. 1 market share in electric vehicles through consistent progress and rollouts.

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