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GENERAL MOTORS CORPORATION

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General Motors : GM CEO faces harsh criticism from U.S. lawmakers over Mexico investments

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12/06/2018 | 06:49pm EST
GM CEO Barra speaks to media after meeting with Michigan Congressional delegation in Washington

WASHINGTON (Reuters) - General Motors Chief Executive Mary Barra came under harsh criticism from members of Congress from Michigan on Thursday for building a new vehicle in Mexico while ending production at five North American assembly plants and cutting nearly 15,000 jobs.

On the second day of meetings on Capitol Hill, Barra faced a tough session with normally supportive lawmakers from the state where GM is based and has thousands of workers.

Senator Gary Peters, a Michigan Democrat, questioned why GM was launching production of its new Chevrolet Blazer SUV in Mexico as it was cutting production in the United States and said the company needs to move the vehicle to the United States.

"We did get answers as to some of the decisions that they made. But I think they need to revisit that thought process and understand the importance of making (vehicles) locally," Peters said. "The reason you have excess capacity in the United States is because you've built capacity in Mexico."

In 2014, GM announced it was investing $5 billion in Mexico through 2018 to modernize and expand its manufacturing facilities there. GM says that since 2009 it has invested $22 billion in U.S. facilities.

Representative Sander Levin, a Michigan Democrat, said GM pays less than $3 an hour at four plants in Mexico, a fraction of what it pays in the United States.

"It’s been very profitable to leave the United States and go to Mexico," Levin said of GM's expanded production of trucks and SUVs in Mexico.

Lawmakers were angered by the lack of notice before GM's job cut announcement last week and wanted assurances that GM would not be closing additional U.S. plants.

Barra told reporters after the meetings it was "important for General Motors to make necessary but incredibly difficult changes."

GM is ending production at its Detroit-Hamtramck Assembly plant next year, as well as at its Warren Transmission plant in suburban Detroit, along with plants in Ohio, Maryland and Canada and eliminating about 8,000 salaried positions.

Barra said the decision to build the Blazer in Mexico, which was announced in June, "was made many years ago."

She told Reuters on Wednesday it would be "very costly" to reverse course because the new SUV was launching in days. She also noted GM is launching a number of new vehicles in Michigan next year.

Asked if any more U.S. facilities were at risk of closing, Barra said GM "looked at what steps we needed to take to strengthen the company... We think the steps we've taken are what's necessary for our future."

Representative Tim Walberg, a Michigan Republican, said lawmakers were caught off guard by the job cuts and expressed their anger, but added, "nothing was thrown."

Representative Brenda Lawrence, who represents Detroit, said lawmakers were putting GM was on notice about future production decisions, noting the company is making strong profits and got a massive taxpayer bailout a decade ago.

“We are watching the decisions they are making,” Lawrence said.

(Reporting by David Shepardson; Editing by Bill Berkrot)

By David Shepardson

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Financials ($)
Sales 2019 147 B
EBIT 2019 11 413 M
Net income 2019 8 769 M
Finance 2019 6 407 M
Yield 2019 4,01%
P/E ratio 2019 6,37
P/E ratio 2020 6,60
EV / Sales 2019 0,33x
EV / Sales 2020 0,33x
Capitalization 55 097 M
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Mean consensus OUTPERFORM
Number of Analysts 22
Average target price 46,4 $
Spread / Average Target 19%
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Managers
NameTitle
Mary Teresa Barra Chairman & Chief Executive Officer
Mark L. Reuss President
Dhivya Suryadevara Chief Financial Officer & Executive Vice President
Randall D. Mott Chief Information Officer & Senior Vice President
Patricia Fiorello Russo Independent Director
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