Why is GM making such drastic cuts now?

General Motors To Close Ohio Plant, Thousands Affected

Now, GM says the Cruze will no longer be sold in the US and production will end March 1. Toyota Motor Corp. also has discussed cutting costs, even though it's building a new assembly plant in Alabama.

As unmistakable as the coming future is, it's still a relatively long way off for an industry that still manages to sell more than 19 million vehicles in North America each year.

The news out of Detroit Monday offered a stark reminder that the fortunes of Wall Street and Main Street often move in opposite directions. "The automaker's shares fell following the tweets and were down more than 3 percent on Tuesday afternoon, on track for their worst day in a month", CNBC reports.

On a conference call, GM CEO Mary Barra said that the company is "taking this action now while the company and the economy are strong to keep ahead of changing market conditions".

The Detroit-based firm said it is shutting assembly plants in Ohio, Michigan and Ontario in Canada. In July 2017, speaking at a rally about 20 miles away in Youngstown (Ohio), Trump said he saw too many empty factories in the area and pledged to revive manufacturing there.

GM's attempt to close the factories still has to be negotiated with the United Auto Workers union, which has promised to fight them legally and in collective bargaining.

"I really do believe that this is a company that is identifying for itself a very different business model. They better get back to OH and soon", Trump said Monday afternoon from the White House. Wall Street cheered the actions, while United States and Canadian leaders expressed outrage.

More news: USA police fire tear gas at migrants trying to cross from Mexico

"They say the Chevy Cruze is not selling well. So I said: 'Then put a auto that is selling well in there but get it open fast'".

"I'm going to leave that to him", Kudlow said when asked if Trump has consequences in mind for the major automaker. "I'm not happy about it". "They better put something else in".

But that argument all but evaporated Monday when the company announced that as part of its plan to save US$6 billion by the year 2020, it was also shutting down production at four other USA plants - several of them deep in Rust Belt states that helped elevate Trump to the presidency in 2016. The plan is being rolled out now while the economy's strong, she said, instead of downsizing amid a recession in the future.

The factory announcements likely represented GM's opening bid in contract talks with the union that start next year, said Kristen Dziczek, vice president of labor and industry with the Center for Automotive Research, an industry think tank in Ann Arbor, Michigan. The company plans to layoff thousands of salaried workers in January.

It comes as the auto giant restructures to cut costs and focus more on electric and autonomous vehicles. The automaker says the decision to reduce American production has to do with reduced demand for cars like the Chevrolet Cruze, which is built at the OH plant, and an overall strategic shift towards more popular crossover and SUV models.

Barra defended the decision of the General Motors.

Trump could not unilaterally cut off the federal government's aid to the automobile company, as much of the government funding for the company is determined by acts of Congress.

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