Scrap Flows Affected by GM Downsizing

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Scrap Flows Affected by GM Downsizing

GM cars

General Motors (GM), a Detroit based automaker, has announced it is shutting down, three assembly plants and two transmission plants in North America. Three of the plants are located in the United States, one is in Canada and another is in Maryland. In a news release on Nov. 26 outlining its near- and medium-term strategies, GM says assembly plants that will be idled in 2019 are its Detroit-Hamtramck plant in Michigan, Lordstown plant in northeast Ohio and its plant in Oshawa, Ontario. GM says it is also idling its Warren Transmission Operations in suburban Detroit and its Baltimore Operations in White Marsh, Maryland, which also produces transmissions.

The Purpose of GM Plants

Assembly plants and transmission plants can generate considerable scrap materials on their own, most prominently metal but also old corrugated containers (OCC) and plastic film. Each of the GM plants are also served by layers, or tiers, or nearby supplier plants that assemble or make components for electric vehicles and hybrid vehicles. According to the automaker, GM has recently invested in newer, highly efficient vehicle architectures, especially in trucks, crossovers and SUV’s. GM intends to prioritize future investments in battery-electric vehicles and self-driving technology. They expect that more than 75 percent of their global sales volume will come from five vehicle architectures by the early next decade.

 The Results of Downsizing

Due to GM planning to end production at several North American factories, marking the auto maker’s first significant downsizing since its bankruptcy last decade as the company tries to adjust to weak sedan sales, it also plans to cut up to 14,800 jobs in the U.S. and Canada. This big move which will be affecting plants ion Michigan, Ohio and Canada would reduce GM’s annual cost by $4.5 billion by then end of 2020, freeing up money to invest in electric and self-driving vehicles. According to GM Chief Executive, Mary Barra, despite a strong economy and the company’s healthy earnings, she wants to act now to help GM sustain profits through an expected downturn in the U.S. car market and keep investing in burgeoning technologies. This change is an important step towards transforming the company.

Creating Jobs within the U.S.

President Trump has continued to press U.S. companies to create jobs at home rather than abroad. Last year he aimed at GM for building a version of the Chevrolet Cruze in Mexico. The United Auto Workers, representing workers at the American plants said G.M.’s move “will not go unchallenged.” Closing domestic plants while expanding production in China and Mexico is profoundly damaging to our American workforce, said the union vice president in charge of negotiation with G.M., Terry Dittes. In an interview with The Wall Street Journal, Mr. Trump said he told Ms. Barra that she should stop making cars in China and open a new plant in Ohio to replace the one that is ending production. According to GM spokesman Nick Richards, the decisions were made as part of the company’s ongoing transformation and are not related to any recent trade or tariff decisions. Mr. Trump In March implemented a 25% tariff on steel imports, which raised both domestic and imported steel process in the U.S. GM previously reported it expected tariffs to raise its material costs $1 billion in 2018. Trump believes GM’s decision has nothing to do with tariffs imposed by his administration on China and the European Union. In a statement, GM defended its record of U.S. investment, saying it has spent $6.6 billion on its U.S. plants over the past four years, creating or preserving 17,600 jobs.

Response to New-Car Sales

Part of the cutback is a response to a slowdown in new-car sales that has prompted automakers to slim their operations and shed jobs. There has been a decline in sales of smaller cars as consumers have gravitated toward pickup trucks and sport-utility vehicles. Although plants will cease production next year, plants will not officially close. The future of those facilities will be determined during 2019 negotiations with the United Auto Workers. All five of the affected plants are considered “unallocated”, which means that at this time these plants don’t have a product.

The Future of the Global Industry

Although carmakers are facing a potential slump, they continue to spend heavily to develop electric vehicles and self-driving technology, both to meet regulatory mandates and to anticipate the future of driving. This shift is expected to remake the global industry and enable companies to enter new and potentially lucrative businesses.

Recycle, Recycle, Recycle

The auto industries are one of the major industries that generates a lot of scrap metal that can be recycled. Auto industries will have a lot of leftover parts in their body shops and manufacturing plants. While scrapping is obviously most beneficial to companies that work with metals in their daily production activities, any business can take advantage of, and benefit from, selling their excess metals.  The high demand for scrap metal to be used in manufacturing new products, constructing new buildings, and creating all sorts of smaller parts, is why recycling businesses got started in the first place. On that note let’s remember to recycle, not only to benefit business, but to protect our environment.

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