New York - 27 November 2018

1. Joseph Foudy, Professor of Economics, NYU Stern School of Business at desk

2. SOUNDBITE (English) Joseph Foudy, Professor of Economics, NYU Stern School of Business:

"This is a pretty significant cut when you consider that the company has been pretty successful since its turn around after the Great Recession. It's also happening at the top of the business cycle when the economy has been quite strong. And so I think it's quite surprising to a number of people but it tells you both where they think the car market is going as well as there are fears for the macro economy moving forward."

3. Foudy with charts

4. SOUNDBITE (English) Joseph Foudy, Professor of Economics, NYU Stern School of Business:

"There's three different issues I think they're facing. Number one is it's clearly continuing to move away from sedans and towards SUVs and so the factories being closed are really a further sort of move away from the car market towards crossovers and SUVs. Secondly they worry that the overall car market is going to be slowing down - that the economy is right now sort of at its peak and it's hard to imagine it's going to do better moving forward. The third thing they have to worry about is just a change towards both electric and self-driving cars along with that you know changes in car ownership. You know they see a world in which there are fewer car sales, cars last longer and the nature of car technology will be quite different."

5. Foudy explaining chart

6. SOUNDBITE (English) Joseph Foudy, Professor of Economics, NYU Stern School of Business:

"They know that capital investment in these new technologies is going to be in the billions. And so they're trying to get ahead of this curve."

7. General Motors chart

8. SOUNDBITE (English) Joseph Foudy, Professor of Economics, NYU Stern School of Business:

"You know they're trying to position themselves for a piece of that where they don't sell cars but sell services or rides. Whether they can do that I think is a really open question and I'd be a bit skeptical but they see a wave coming and they're trying to get ahead of it."

9. Foudy at desk

10. SOUNDBITE (English) Joseph Foudy, Professor of Economics, NYU Stern School of Business:

"Well the tariff cost, tariffs are adding to the cost of steel and other raw materials and so that's sort of increasing the pressure that the companies on. But this is really a broader reaction to where they think the economy and the car market is going."

11. Wide of Foudy

12. SOUNDBITE (English) Joseph Foudy, Professor of Economics, NYU Stern School of Business:

"And you know there's a short term cyclical trend where they think the car market and the economy may soften over the next year or two. But there's a longer term trend where they really think we're moving to electric cars where we're moving to self driving cars that they think the market is fundamentally changing."

13. Foudy at computer

14. SOUNDBITE (English) Joseph Foudy, Professor of Economics, NYU Stern School of Business:

"So innovation is shorthand for electric and autonomous vehicles not just in the United States but they think they could be launching about 20 models over the next couple of years that are electric in China. GM now sells more cars in China than it does in the United States."

15. Foudy with desk

16. SOUNDBITE (English) Joseph Foudy, Professor of Economics, NYU Stern School of Business:

"The average car quality is going up you routinely run into people whose cars are over 100,000 miles that have very few problems. The industry is a victim of its own success in that the average quality of an American car has jumped enormously. We don't see any difference now between American or Japanese carmakers."

17. Foudy upward view

18. SOUNDBITE (English) Joseph Foudy, Professor of Economics, NYU Stern School of Business:

"Electric cars in contrast to the internal combustion engine have far fewer parts and will last much longer. Some people hypothesize that an electric car like a Chevy Volt or a Tesla could last a million miles before it wears out."

19. Foudy at computer

20. SOUNDBITE (English) Joseph Foudy, Professor of Economics, NYU Stern School of Business:

"There's a real risk around the world for car companies that they'll face increasing regulation on emissions - even if we don't focus on that in the United States right now with the current administration - they have to sell cars for China and for Europe where emission standards are only going to get tougher and tougher."

21. Foudy talking

22. SOUNDBITE (English) Joseph Foudy, Professor of Economics, NYU Stern School of Business:

"And so if you look at the layoffs it's 15,000 workers. The good news is this is happening during a period when the economy is relatively strong but the horrible news is that it's concentrated in a number of communities for whom it's going to be devastating. You know we had a bankruptcy of Toys R Us that was 30,000 employees twice as many. Toys R Us didn't even give severance packages to the vast majority of its employees. But Toys R Us is dispersed across the entire country. This is concentrated in a handful of industrial towns that you know really can't recover from this."

23. Foudy wide shot at desk

General Motors will cut up to 14,000 workers in North America and put five plants up for possible closure as it abandons many of its car models and restructures to focus more on autonomous and electric vehicles, the automaker announced Monday.

The reductions could amount to as much as 8 percent of GM's global workforce of 180,000 employees.

The restructuring reflects changing North American auto markets as manufacturers continue to shift away from cars toward SUVs and trucks. In October, almost 65 percent of new vehicles sold in the U.S. were trucks or SUVs. That figure was about 50 percent cars just five years ago.

GM is shedding cars largely because it doesn't make money on them, Citi analyst Itay Michaeli wrote in a note to investors.

The layoffs come amid the backdrop of a trade war between the U.S., China and Europe that likely will lead to higher prices for imported vehicles and those exported from the U.S. Barra said the company faces challenges from tariffs but she did not directly link the layoffs to them.

The planned reduction includes about 8,000 white-collar employees, or 15 percent of GM's North American white-collar workforce. Some will take buyouts while others will be laid off.

At the factories, around 3,300 blue-collar workers could lose jobs in the U.S. and another 2,600 in Canada, but some U.S. workers could transfer to truck or SUV factories that are increasing production. The cuts mark GM's first major downsizing since shedding thousands of jobs in the Great Recession.

General Motors Co.'s pre-emptive strike to get leaner before the next downturn likely will be followed by Ford Motor Co., which has said it is restructuring and will lay off an unspecified number of white-collar workers. Toyota Motor Corp. also has discussed cutting costs, even though it's building a new assembly plant in Alabama.

GM isn't the first to abandon much of the car market. Fiat Chrysler Automobiles got out of small and midsize cars two years ago, while Ford announced plans to shed all cars but the Mustang sports car in the U.S. in the coming years.

Factories that could be closed include assembly plants in Detroit and Oshawa, Ontario, and Lordstown, Ohio, as well as transmission plants in Warren, Michigan, and near Baltimore.