GM Shutters Plant in Canada – Analyst Blog

The Canadian arm of General Motors (MTLQQ) has decided to shut down its last remaining transmission plant in Windsor, Ontario. The closure of the plant will cease the production of transmissions for the Pontiac G5 and Chevy Cobalt, leaving nearly 500 workers unemployed.

 

General Motors (or GM), one of the world’s largest automakers operating in around 157 countries, has been hit hard by the economic slowdown. To this is added the growing competition from the Chinese automakers and from Toyota Motors (TM) in Japan.

 

GM reeled under huge losses last year before declaring bankruptcy. Consequently, each of its subsidiaries including GM Canada has felt the backlash. GM Canada received investments worth $10.1 billion from the federal and Ontario governments, but these failed to improve its condition.

 

In order to rally round, GM Canada took to cost reduction through job cuts and closing of plants. Since May 2008, the subsidiary has eliminated as many as 1,400 jobs in the country. In addition, it closed down two factories – General Motors Diesel and Oshawa Truck Assembly in Ontario.

 

The cost minimizing programs have apparently paid off in face of challenging economic and industry conditions. GM recorded revenues of $31.44 billion in first quarter 2010, a rise of 40% from the last year. GM North America saw an over 55% increase in revenues to $19.2 billion in the quarter compared with its year-ago level. Earnings per share for the company stood at $1.66.

 

The increase in GM’s revenue as a whole is the consequence of a15.6% improvement in vehicle sales in the domestic market in the same quarter as compared with that of 2009. GM Canada saw a 5% reduction in vehicle sales, though it managed to grab a 15% market share in the North American region. GM North America as a whole performed well, with 12.5% increase in vehicle sales in this quarter over the same period last year.