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GM Korea is the Latest Target In the Company's Cost Cutting
William Maley posted an article in General Motors
This past year has seen General Motors not be shy with scaling back operations in various international markets. The company sold off Opel/Vauxhall to PSA Group, ended sales of Chevrolet vehicles in India, and closed down their operations in South Africa. Now, GM's Korea operations are on the chopping block. Last week, GM CEO Mary Barra revealed that company officials were in discussion with minority owners and union officials that could lead to "some rationalization actions or restructuring." "We're going to have to take actions going forward to have a viable business," said Barra during a conference call talking about GM's 2017 financial results. Sales of GM vehicles in Korea have dropped 20 percent, while manufacturing costs have increased. This has made South Korea a poor place to export vehicles to other markets. This week, GM announced that it will shutter the Gunsan plant (one of the four plants operating in South Korea). The plant employs 2,000 out of the 16,000 workers employed at GM Korea. GM said the reason for the closure came down to high labor costs and low output. The plant only operated at 20 percent of its capacity last year according to Reuters. Unsurprisingly, the news angered the South Korean government and workers at the plant. “The government expresses deep regret over GM’s one-sided decision to suspend and shut down” the plant, the finance ministry said in a statement. The ministry said it wants to conduct an audit of GM's operations help with the restructuring plan. As for workers at Gunsan plant, workers staged a protest yesterday, declaring the move a “death sentence”, and threatening a strike. “Let’s protect our right to live on our own,” said Kim Jae-hong, the leader of the workers’ union at the Gunsan branch. A GM Korea spokesman said the company "would continue discussions with the union and seek their understanding over the closure plan." Workers though aren't fully buying this. “We can’t accept this. The company informed us about the closure plan, not asking for our opinion. It was already the end of the discussions,” Dang Sung-geun, a senior official at the union of GM Korea told Reuters. “This is like a death sentence notice before the Lunar New Year holidays.” Source: Automotive News (Subscription Required), Bloomberg, Reuters (2) -
This past year has seen General Motors not be shy with scaling back operations in various international markets. The company sold off Opel/Vauxhall to PSA Group, ended sales of Chevrolet vehicles in India, and closed down their operations in South Africa. Now, GM's Korea operations are on the chopping block. Last week, GM CEO Mary Barra revealed that company officials were in discussion with minority owners and union officials that could lead to "some rationalization actions or restructuring." "We're going to have to take actions going forward to have a viable business," said Barra during a conference call talking about GM's 2017 financial results. Sales of GM vehicles in Korea have dropped 20 percent, while manufacturing costs have increased. This has made South Korea a poor place to export vehicles to other markets. This week, GM announced that it will shutter the Gunsan plant (one of the four plants operating in South Korea). The plant employs 2,000 out of the 16,000 workers employed at GM Korea. GM said the reason for the closure came down to high labor costs and low output. The plant only operated at 20 percent of its capacity last year according to Reuters. Unsurprisingly, the news angered the South Korean government and workers at the plant. “The government expresses deep regret over GM’s one-sided decision to suspend and shut down” the plant, the finance ministry said in a statement. The ministry said it wants to conduct an audit of GM's operations help with the restructuring plan. As for workers at Gunsan plant, workers staged a protest yesterday, declaring the move a “death sentence”, and threatening a strike. “Let’s protect our right to live on our own,” said Kim Jae-hong, the leader of the workers’ union at the Gunsan branch. A GM Korea spokesman said the company "would continue discussions with the union and seek their understanding over the closure plan." Workers though aren't fully buying this. “We can’t accept this. The company informed us about the closure plan, not asking for our opinion. It was already the end of the discussions,” Dang Sung-geun, a senior official at the union of GM Korea told Reuters. “This is like a death sentence notice before the Lunar New Year holidays.” Source: Automotive News (Subscription Required), Bloomberg, Reuters (2) View full article
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On Thursday, Opel CEO Michael Lohscheller will be presenting a new restructuring plan for its future under the PSA Group umbrella. Thanks a report from German newspaper Frankfurter Allgemeine Zeitung, we have some idea of what this plan entails. According to the paper, Opel will be cutting down on the models it offers and begin to focus on high-margin segments. The brand will also be tasked with developing technology for partial and complete electrification of all PSA Group models. To pull this off, Opel’s Rüsselsheim tech center will become the central point for the development of this tech. Other parts of the plan outlined in Frankfurter Allgemeine's report include, Combining the purchasing activities of the two companies Launching Opel into new markets (this was considered to be too taboo for GM) Cut labor costs Reduce the amount of discounting for new vehicles Future models to use platforms, engines, and transmissions from PSA Source: Frankfurter Allgemeine Zeitung, Automotive News Europe (Subscription Required) -
On Thursday, Opel CEO Michael Lohscheller will be presenting a new restructuring plan for its future under the PSA Group umbrella. Thanks a report from German newspaper Frankfurter Allgemeine Zeitung, we have some idea of what this plan entails. According to the paper, Opel will be cutting down on the models it offers and begin to focus on high-margin segments. The brand will also be tasked with developing technology for partial and complete electrification of all PSA Group models. To pull this off, Opel’s Rüsselsheim tech center will become the central point for the development of this tech. Other parts of the plan outlined in Frankfurter Allgemeine's report include, Combining the purchasing activities of the two companies Launching Opel into new markets (this was considered to be too taboo for GM) Cut labor costs Reduce the amount of discounting for new vehicles Future models to use platforms, engines, and transmissions from PSA Source: Frankfurter Allgemeine Zeitung, Automotive News Europe (Subscription Required) View full article
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Ford's European branch has had a tough time with three years of losses and making some drastic changes, including closing three factories back in 2013. But 2015 saw the branch make a $259 million profit. The blue oval wants to continue that with a new restructure strategy. The strategy includes a "voluntary separation" program that will allow workers to leave Ford at their own behest. Ford says this will save around $200 million per year in reduced staffing costs. Ford will also be eliminating less profitable models” from its product lineup. What models those might be are unknown at this time. It should be noted this elimination will not affect plans to launch seven new or refreshed models this year. Other additions for Ford's Europe lineup include, Five crossovers/SUVs in the next three years Four more vehicles with the Vignale luxury trim Expansion of the electric and hybrid lineup “In the past three years, Ford of Europe has improved its business in all areas and moved from deep losses to a $259 million profit in 2015. This is a good first step. We are absolutely committed to accelerating our transformation, taking the necessary actions to create a vibrant business that’s solidly profitable in both good times and down cycles,” said Jim Farley, Ford executive vice president, Europe, Middle East and Africa. Source: Ford Press Release is on Page 2 FORD ACCELERATES TRANSFORMATION PLAN IN EUROPE TO BUILD VIBRANT AND SUSTAINABLY PROFITABLE BUSINESS After returning to profit in 2015, Ford of Europe is accelerating its plan to deliver a vibrant and sustainably profitable business targeting higher profit and pre-tax operating margin in 2016 and 6 to 8 percent operating margin in the longer termRefocusing product strategy to add new vehicles and derivatives in segments with the highest growth and profit potential such as crossovers and SUVs, and eliminating less profitable vehicles over time Launching seven new or freshened vehicles in 2016 including Focus RS and new Kuga and Edge SUVs; further enhancing Ford’s brand image in Europe through increased experiential marketing and best-in-class dealer experienceReducing costs in all areas to lower breakeven, help offset rising regulatory costs and invest in Ford Smart Mobility; voluntary separation program announced today to achieve ongoing administrative and selling expense savings of $200 million annually Targeting annual manufacturing efficiencies of more than 7 percent and improved capacity utilizationIdentifying new revenue streams through Ford Smart Mobility, including customer loyalty, multi-modal transport services, fleet services and ride services Ford Motor Company is accelerating its transformation in Europe – including new product, brand and efficiency actions – to deliver improved profits in 2016 and a 6-8 percent operating margin for Ford of Europe in the longer term. Ford’s European strategy calls for a more streamlined and profitable product line; more emotional and experiential brand communications; and a leaner cost structure to lower breakeven and help offset growing regulatory costs. “In the past three years, Ford of Europe has improved its business in all areas and moved from deep losses to a $259 million profit in 2015. This is a good first step,” said Jim Farley, Ford executive vice president, Europe, Middle East and Africa. “We are absolutely committed to accelerating our transformation, taking the necessary actions to create a vibrant business that’s solidly profitable in both good times and down cycles.” After closing three manufacturing plants in Western Europe since 2013 and reaching an innovative cost-saving agreement with labour unions in Germany, Ford of Europe continues to enhance its cost efficiency and manufacturing capacity utilization. Ford today initiated a voluntary separation program in Europe supporting a significant reduction in administrative and selling costs to reach industry benchmark levels of efficiency. With the move, Ford of Europe expects to save about $200 million a year on an ongoing basis. “We are creating a far more lean and efficient business that can deliver healthy returns and earn future investment,” Farley said. “Our job is to make our vehicles as efficiently as possible, spending every dollar in a way that serves customers’ needs and desires, and creating a truly sustainable, customer-focused business.” Ford of Europe said it would continue to drive improvements in its manufacturing operations, targeting efficiencies of greater than 7 percent year-over-year going forward, and improving its manufacturing capacity utilization. Product surge After launching more than 30 new and refreshed vehicles since late 2012, and increasing market share in each of the past two years and boosting sales 10 percent in 2015, Ford of Europe will continue to strengthen its vehicle line with plans to: Launch seven new and refreshed vehicles in 2016, including the Focus RS performance hatch and the new Kuga and Edge SUVs. Streamline core model line-up to eliminate less profitable vehicle lines over time Launch five new vehicles to compete in the SUV and crossover space in the next three years, starting with new Edge in the second quarter. SUVs remain Europe’s fastest-growing market segment, and Ford expects to surpass 200,000 SUV sales in Europe for the first time in 2016 – a growth of more than 30 percent compared with 2015 With the launch of Focus RS, joining Focus ST, Fiesta ST and Mustang, Ford of Europe expects record performance car sales in Europe in 2016 of about 40,000 vehicles Expand upscale Vignale line and customer experience from one model today – Mondeo Vignale – to at least five Vignale models by 2017 Introduce new plug-in hybrid, hybrid-electric and full electric vehicles in Europe by 2020 – part of Ford’s previously announced $4.5 billion investment in electrified vehicle solutions Ford this year will offer eight vehicle lines in Europe with sophisticated all-wheel drive or four-wheel drive technologies, compared to three models in 2012. Ford expects to sell about 140,000 all-wheel drive and four-wheel drive vehicles in Europe in 2016 – a 120 percent increase compared to 2014 Continue to invest in and strengthen Europe’s best-selling line-up of commercial vehicles, including new powertrain and technologies for Transit Custom and Transit 2-tonne, and a freshened Ranger – Europe’s No.1 top-selling pickup for 2015 “We are creating a more exciting and distinctive Ford line-up in Europe,” Farley said. “When we play to our strengths, we can compete and win in Europe – even against premium brands.” Strengthening the brand Building on its improving brand image in Europe, Ford plans to reach new customers through its exciting new products, increased experiential marketing and best-in-class dealer and customer experience with the completion of 500 new, state-of-the-art flagship FordStores in major urban areas. Ford is identifying opportunities for new revenue streams in Europe – recurring and potentially higher margin – as part of Ford Smart Mobility. Key areas of focus include customer loyalty, multi-modal transport services, fleet services and ride services. As an initial step in January, Ford unveiled FordPass – a platform that reimagines the relationship between automaker and consumer. FordPass members can talk to a personal mobility assistant to help with travel arrangements, reserve and pay for advance parking, earn loyalty points, schedule service and much more. FordPass launches in Europe later this year. FordPass also includes the opening of FordHubs, where consumers will be able to explore Ford’s latest innovations, learn about its mobility services, and experience exclusive events, with the first FordHub in Europe opening in London this year. “We are investing in Ford Smart Mobility, which will deepen our customer relationships and reduce our conquest marketing costs,” said Roelant de Waard, vice president, Marketing, Sales and Service, Ford of Europe. “There is a huge opportunity in Europe to give our customers what they want, sometimes before they even know it, by anticipating their needs through data and data analytics.” -
Ford's European branch has had a tough time with three years of losses and making some drastic changes, including closing three factories back in 2013. But 2015 saw the branch make a $259 million profit. The blue oval wants to continue that with a new restructure strategy. The strategy includes a "voluntary separation" program that will allow workers to leave Ford at their own behest. Ford says this will save around $200 million per year in reduced staffing costs. Ford will also be eliminating less profitable models” from its product lineup. What models those might be are unknown at this time. It should be noted this elimination will not affect plans to launch seven new or refreshed models this year. Other additions for Ford's Europe lineup include, Five crossovers/SUVs in the next three years Four more vehicles with the Vignale luxury trim Expansion of the electric and hybrid lineup “In the past three years, Ford of Europe has improved its business in all areas and moved from deep losses to a $259 million profit in 2015. This is a good first step. We are absolutely committed to accelerating our transformation, taking the necessary actions to create a vibrant business that’s solidly profitable in both good times and down cycles,” said Jim Farley, Ford executive vice president, Europe, Middle East and Africa. Source: Ford Press Release is on Page 2 FORD ACCELERATES TRANSFORMATION PLAN IN EUROPE TO BUILD VIBRANT AND SUSTAINABLY PROFITABLE BUSINESS After returning to profit in 2015, Ford of Europe is accelerating its plan to deliver a vibrant and sustainably profitable business targeting higher profit and pre-tax operating margin in 2016 and 6 to 8 percent operating margin in the longer termRefocusing product strategy to add new vehicles and derivatives in segments with the highest growth and profit potential such as crossovers and SUVs, and eliminating less profitable vehicles over time Launching seven new or freshened vehicles in 2016 including Focus RS and new Kuga and Edge SUVs; further enhancing Ford’s brand image in Europe through increased experiential marketing and best-in-class dealer experienceReducing costs in all areas to lower breakeven, help offset rising regulatory costs and invest in Ford Smart Mobility; voluntary separation program announced today to achieve ongoing administrative and selling expense savings of $200 million annually Targeting annual manufacturing efficiencies of more than 7 percent and improved capacity utilizationIdentifying new revenue streams through Ford Smart Mobility, including customer loyalty, multi-modal transport services, fleet services and ride services Ford Motor Company is accelerating its transformation in Europe – including new product, brand and efficiency actions – to deliver improved profits in 2016 and a 6-8 percent operating margin for Ford of Europe in the longer term. Ford’s European strategy calls for a more streamlined and profitable product line; more emotional and experiential brand communications; and a leaner cost structure to lower breakeven and help offset growing regulatory costs. “In the past three years, Ford of Europe has improved its business in all areas and moved from deep losses to a $259 million profit in 2015. This is a good first step,” said Jim Farley, Ford executive vice president, Europe, Middle East and Africa. “We are absolutely committed to accelerating our transformation, taking the necessary actions to create a vibrant business that’s solidly profitable in both good times and down cycles.” After closing three manufacturing plants in Western Europe since 2013 and reaching an innovative cost-saving agreement with labour unions in Germany, Ford of Europe continues to enhance its cost efficiency and manufacturing capacity utilization. Ford today initiated a voluntary separation program in Europe supporting a significant reduction in administrative and selling costs to reach industry benchmark levels of efficiency. With the move, Ford of Europe expects to save about $200 million a year on an ongoing basis. “We are creating a far more lean and efficient business that can deliver healthy returns and earn future investment,” Farley said. “Our job is to make our vehicles as efficiently as possible, spending every dollar in a way that serves customers’ needs and desires, and creating a truly sustainable, customer-focused business.” Ford of Europe said it would continue to drive improvements in its manufacturing operations, targeting efficiencies of greater than 7 percent year-over-year going forward, and improving its manufacturing capacity utilization. Product surge After launching more than 30 new and refreshed vehicles since late 2012, and increasing market share in each of the past two years and boosting sales 10 percent in 2015, Ford of Europe will continue to strengthen its vehicle line with plans to: Launch seven new and refreshed vehicles in 2016, including the Focus RS performance hatch and the new Kuga and Edge SUVs. Streamline core model line-up to eliminate less profitable vehicle lines over time Launch five new vehicles to compete in the SUV and crossover space in the next three years, starting with new Edge in the second quarter. SUVs remain Europe’s fastest-growing market segment, and Ford expects to surpass 200,000 SUV sales in Europe for the first time in 2016 – a growth of more than 30 percent compared with 2015 With the launch of Focus RS, joining Focus ST, Fiesta ST and Mustang, Ford of Europe expects record performance car sales in Europe in 2016 of about 40,000 vehicles Expand upscale Vignale line and customer experience from one model today – Mondeo Vignale – to at least five Vignale models by 2017 Introduce new plug-in hybrid, hybrid-electric and full electric vehicles in Europe by 2020 – part of Ford’s previously announced $4.5 billion investment in electrified vehicle solutions Ford this year will offer eight vehicle lines in Europe with sophisticated all-wheel drive or four-wheel drive technologies, compared to three models in 2012. Ford expects to sell about 140,000 all-wheel drive and four-wheel drive vehicles in Europe in 2016 – a 120 percent increase compared to 2014 Continue to invest in and strengthen Europe’s best-selling line-up of commercial vehicles, including new powertrain and technologies for Transit Custom and Transit 2-tonne, and a freshened Ranger – Europe’s No.1 top-selling pickup for 2015 “We are creating a more exciting and distinctive Ford line-up in Europe,” Farley said. “When we play to our strengths, we can compete and win in Europe – even against premium brands.” Strengthening the brand Building on its improving brand image in Europe, Ford plans to reach new customers through its exciting new products, increased experiential marketing and best-in-class dealer and customer experience with the completion of 500 new, state-of-the-art flagship FordStores in major urban areas. Ford is identifying opportunities for new revenue streams in Europe – recurring and potentially higher margin – as part of Ford Smart Mobility. Key areas of focus include customer loyalty, multi-modal transport services, fleet services and ride services. As an initial step in January, Ford unveiled FordPass – a platform that reimagines the relationship between automaker and consumer. FordPass members can talk to a personal mobility assistant to help with travel arrangements, reserve and pay for advance parking, earn loyalty points, schedule service and much more. FordPass launches in Europe later this year. FordPass also includes the opening of FordHubs, where consumers will be able to explore Ford’s latest innovations, learn about its mobility services, and experience exclusive events, with the first FordHub in Europe opening in London this year. “We are investing in Ford Smart Mobility, which will deepen our customer relationships and reduce our conquest marketing costs,” said Roelant de Waard, vice president, Marketing, Sales and Service, Ford of Europe. “There is a huge opportunity in Europe to give our customers what they want, sometimes before they even know it, by anticipating their needs through data and data analytics.” View full article
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General Motors is making some major changes in Russia. The automaker announced today that it will withdraw Opel and mainstream Chevrolet models in December, and focus on the premium segment of the Russian market with Cadillac and iconic Chevrolet models (Camaro, Corvette, and Tahoe). “This change in our business model in Russia is part of our global strategy to ensure long-term sustainability in markets where we operate. This decision avoids significant investment into a market that has very challenging long-term prospects,” said GM President Dan Ammann. GM will still offer parts and service for those who own an Opel and mainstream Chevrolet vehicles. Along with the departure of Opel and certain Chevrolet models, GM will idle its plant in St. Petersburg by the middle of this year. Source: General Motors Press Release is on Page 2 GM to Change Business Model in Russia Focus on Cadillac and iconic Chevrolet vehicles Wind down Opel brand and sale of mainstream Chevrolet cars Idle GM Auto manufacturing facility in St. Petersburg Part of GM’s strategy to ensure long-term sustainability in global markets DETROIT – General Motors today announced plans to change its business model in Russia. GM will focus on the premium segment of the Russian market with Cadillac and U.S.-built iconic Chevrolet products such as the Corvette, Camaro and Tahoe. The Chevrolet brand will minimize its presence in Russia and the Opel brand will leave the market by December 2015. “This change in our business model in Russia is part of our global strategy to ensure long-term sustainability in markets where we operate,” said GM President Dan Ammann. “This decision avoids significant investment into a market that has very challenging long-term prospects.” Opel Group CEO Karl-Thomas Neumann said, “We do not have the appropriate localization level for important vehicles built in Russia and the market environment does not justify a major investment to further localize.” The GM Auto plant in St. Petersburg will halt production by the middle of 2015. GM is planning to idle the plant. Furthermore, the contract assembly of Chevrolet vehicles at GAZ will be discontinued in 2015. The GM-AVTOVAZ joint venture will continue to build and market the current generation Chevrolet NIVA. GM’s global luxury brand Cadillac will be set up for growth in Russia over the next several years as it prepares for numerous product introductions. Chevrolet and Opel will work closely with their dealer networks in Russia to define future steps while ensuring the company will honor its obligations to existing customers in the coming years. “We can assure our customers that we will continue to provide warranty, parts and services for their Chevrolet and Opel vehicles. We want to thank our customers and dealers for their loyalty to the Chevrolet and Opel brands,” said Neumann. “We had to take decisive action in Russia to protect our business. We confirm our outlook to return the European business to profitability in 2016 and stick to our long-term goals as defined in our DRIVE!2022 strategy,” said Neumann. By 2022, the company plans to raise its market share in total Europe to 8 percent and to reach a profit margin of 5 percent. As a result of the decision to change the business model in Russia, GM expects to record net special charges of up to approximately $600 million primarily in the first quarter of 2015. The special charges include sales incentives, dealer restructuring, contract cancellations and severance-related costs. Approximately $200 million of the net special charges will be non-cash expenses. -
General Motors is making some major changes in Russia. The automaker announced today that it will withdraw Opel and mainstream Chevrolet models in December, and focus on the premium segment of the Russian market with Cadillac and iconic Chevrolet models (Camaro, Corvette, and Tahoe). “This change in our business model in Russia is part of our global strategy to ensure long-term sustainability in markets where we operate. This decision avoids significant investment into a market that has very challenging long-term prospects,” said GM President Dan Ammann. GM will still offer parts and service for those who own an Opel and mainstream Chevrolet vehicles. Along with the departure of Opel and certain Chevrolet models, GM will idle its plant in St. Petersburg by the middle of this year. Source: General Motors Press Release is on Page 2 GM to Change Business Model in Russia Focus on Cadillac and iconic Chevrolet vehicles Wind down Opel brand and sale of mainstream Chevrolet cars Idle GM Auto manufacturing facility in St. Petersburg Part of GM’s strategy to ensure long-term sustainability in global markets DETROIT – General Motors today announced plans to change its business model in Russia. GM will focus on the premium segment of the Russian market with Cadillac and U.S.-built iconic Chevrolet products such as the Corvette, Camaro and Tahoe. The Chevrolet brand will minimize its presence in Russia and the Opel brand will leave the market by December 2015. “This change in our business model in Russia is part of our global strategy to ensure long-term sustainability in markets where we operate,” said GM President Dan Ammann. “This decision avoids significant investment into a market that has very challenging long-term prospects.” Opel Group CEO Karl-Thomas Neumann said, “We do not have the appropriate localization level for important vehicles built in Russia and the market environment does not justify a major investment to further localize.” The GM Auto plant in St. Petersburg will halt production by the middle of 2015. GM is planning to idle the plant. Furthermore, the contract assembly of Chevrolet vehicles at GAZ will be discontinued in 2015. The GM-AVTOVAZ joint venture will continue to build and market the current generation Chevrolet NIVA. GM’s global luxury brand Cadillac will be set up for growth in Russia over the next several years as it prepares for numerous product introductions. Chevrolet and Opel will work closely with their dealer networks in Russia to define future steps while ensuring the company will honor its obligations to existing customers in the coming years. “We can assure our customers that we will continue to provide warranty, parts and services for their Chevrolet and Opel vehicles. We want to thank our customers and dealers for their loyalty to the Chevrolet and Opel brands,” said Neumann. “We had to take decisive action in Russia to protect our business. We confirm our outlook to return the European business to profitability in 2016 and stick to our long-term goals as defined in our DRIVE!2022 strategy,” said Neumann. By 2022, the company plans to raise its market share in total Europe to 8 percent and to reach a profit margin of 5 percent. As a result of the decision to change the business model in Russia, GM expects to record net special charges of up to approximately $600 million primarily in the first quarter of 2015. The special charges include sales incentives, dealer restructuring, contract cancellations and severance-related costs. Approximately $200 million of the net special charges will be non-cash expenses. View full article
