Car market collapse outruns GM moves to keep up

DETROIT (Reuters) – General Motors Co’s monumental announcement on Monday that it will close three car assembly plants in North America and slash its workforce will only partially close the gap between capacity and demand for the automaker’s sedans, according to a Reuters analysis of industry production and capacity data.

Sales of traditional passenger cars in North America have been declining for the past six years and are still withering. After GM ends production next year at factories in Michigan, Ohio and Ontario, it will still have four U.S. car plants, all operating at less than 50 percent of rated capacity, according to figures supplied by LMC Automotive.

In comparison, Detroit-based rivals Ford Motor Co and Fiat Chrysler Automobiles NV will have one car plant each in North America after 2019.

The Detroit Three are facing rapidly dwindling demand for traditional passenger cars from U.S. consumers, many of whom have shifted to crossovers and trucks. Passenger cars accounted for 48 percent of retail light-vehicle sales in the United States in 2014, according to market researchers at J.D. Power and Associates. This year, sedans will account for less than a third of light vehicle sales.

That shift in turn has left most North American car plants operating far below their rated capacities, while many SUV and truck plants are running on overtime.

The collapse in passenger-car demand is a challenge for nearly all automakers in the United States, including Japan’s Toyota Motor Corp and Honda Motor Co Ltd, which have the top-selling models in the compact and midsize car segments. Toyota executives said last month they are evaluating the company’s U.S. model lineup. But Toyota also plans to build compact Corolla sedans at a new $1.6 billion factory it is building in Alabama with partner Mazda Motor Corp.

The obstacles facing GM in its plans to close more auto factories became apparent on Tuesday as U.S. President Donald Trump threatened to block payment of government electric vehicle subsidies to GM. While it is not certain that Trump unilaterally has the power to do that, he made it clear he intends to use his office to pressure the company to keep open a small car plant in Ohio that GM says will stop building vehicles in March.

  • Trump: GM should pay U.S. taxpayers back for bailout
  • Detroit Three narrowing car production in North America

Asked whether GM’s plans to close factories and cut jobs might not solve the demand problem for its sedans, GM spokeswoman Kimberly Carpenter said on Tuesday: “We continuously look at our operations for opportunities to improve our efficiency and capacity utilization. We believe the actions announced yesterday move us in the right direction and we will continue to monitor the market and consumer trends and adjust accordingly.”

Shares of the No. 1 U.S. automaker closed 2.5 percent lower at $36.69 on Tuesday, after rising nearly 5 percent the previous day.

ABANDONMENT ISSUES

GM executives have said they do not intend to abandon cars to the extent that Ford and FCA have. GM car plants that will remain open include Fairfax, Kansas, which builds the Chevrolet Malibu and Cadillac XT4 compact SUV. But that plant is operating at 48 percent of capacity, well below the 80 percent that GM Chief Executive Mary Barra is targeting as the average for North America.

A GM plant in Lansing, Michigan, that builds the Cadillac ATS and CTS and Chevrolet Camaro is running at just 33 percent capacity, while the GM Orion Township, Michigan, facility that builds the Chevrolet Bolt electric car and the Chevrolet Sonic subcompact runs at 34 percent capacity. A Bowling Green, Kentucky, plant that builds the Chevrolet Corvette sports car works at just 27 percent of its potential output, according to LMC data.

“Until GM gets more flexibility in its platforms, it will continue to have to play whack-a-mole with its plants as the market transitions – and it will happen again,” said LMC analyst Bill Rinna.

In all, the four GM car plants that will remain open have a combined capacity of more than 800,000 vehicles a year, but are expected to produce only 360,000 cars this year, according to LMC.

Industry analysts have said the general break-even point for running an assembly plant profitably is around 80 percent. Barra said on Monday GM’s North American plants are running at 70 percent capacity – including truck and SUV plants that are working overtime.

Ford plans to end production in March of the Taurus at its Chicago plant, which also builds the Explorer and Aviator SUVs. That will leave the automaker with only one U.S. car plant, in Flat Rock, Michigan, which currently builds the Ford Mustang and the Lincoln Continental. The Mustang is due for a mild redesign around 2021, but the Continental is scheduled to be phased out then, according to two sources familiar with the company’s plans. Flat Rock is running at just 49 percent of capacity, but Ford has said it plans to add new products to the plant, including its first automated vehicle, in 2021.

Fiat Chrysler still builds the full-size Chrysler 300 and Dodge Charger and Challenger at its Brampton, Ontario, plant. Demand for those large cars remains robust, and the plant is running at nearly 80 percent capacity.

Reporting by Paul Lienert in Detroit; Editing by Joseph White and Matthew Lewis

Two U.S. pipelines rack up violations, threaten industry growth

MEDIA, PENNSYLVANIA (Reuters) – Energy Transfer LP (ET.N) and its Sunoco pipeline subsidiary have racked up more than 800 state and federal permit violations while racing to build two of the nation’s largest natural gas pipelines, according to a Reuters analysis of government data and regulatory records.

The pipelines, known as Energy Transfer Rover and Sunoco Mariner East 2, will carry natural gas and gas liquids from Pennsylvania, Ohio and West Virginia, an area that now accounts for more than a third of U.S. gas production.

Reuters analyzed four comparable pipeline projects and found they averaged 19 violations each during construction.

The Rover and Mariner violations included spills of drilling fluid, a clay-and-water mixture that lubricates equipment for drilling under rivers and highways; sinkholes in backyards; and improper disposal of hazardous waste and other trash. Fines topped $15 million.

Energy Transfer also raised the ire of federal regulators by tearing down a historic house along Rover’s route.

The Appalachia region has become a hub for natural gas as it increasingly replaces coal for U.S. power generation, creating an urgent need for new pipelines. But the recent experience of residents and regulators with the two Energy Transfer pipelines has state officials vowing to tighten laws and scrutinize future projects.

“Ohio’s negative experience with Rover has fundamentally changed how we will permit pipeline projects,” said James Lee, a spokesman for the Ohio Environmental Protection Agency.

Problems with Mariner prompted Pennsylvania legislators to craft bills tightening construction regulations, which have drawn bipartisan support.

“Any pipeline going through this area is going to face resistance which it would not have faced before,” said Pennsylvania State Senator Andy Dinniman, a Democrat.

Energy Transfer spokeswoman Alexis Daniel said the firm remained committed to safe construction and operation and at times went “above and beyond” regulations for the two projects.

Construction of the 713-mile, $4.2 billion Rover started in March 2017 and was planned to proceed at about 89 miles a month, while work on the 350-mile, $2.5 billion Mariner East 2 started in February 2017 and was planned at 50 miles a month, according to company statements on construction schedules. Both were targeted for completion late last year.

Regulators and industry experts said the pace of both projects far exceeded industry norms.

The four other projects examined by Reuters were mostly completed at a pace averaging 17 miles per month. Reuters selected the projects for comparison because, like Rover and Mariner, they cost more than $1.5 billion, stretched at least 150 miles and were under construction at the same time.

Construction on both Energy Transfer pipelines was ultimately slowed when state and federal regulators ordered numerous work stoppages after permit violations. Energy Transfer completed the last two sections of Rover in November and said it expects to put Mariner East 2 in service soon.

In February, Pennsylvania fined the company $12.6 million for environmental damage, including the discharge of drilling fluids into state waters without a permit. After further problems, including the sinkholes, a state judge in May ordered work halted on Mariner East 2.

Administrative Law Judge Elizabeth Barnes wrote that Energy Transfer’s Sunoco unit “made deliberate managerial decisions to proceed in what appears to be a rushed manner in an apparent prioritization of profit over the best engineering.”

While pipeline construction schedules vary, the planned timelines for Rover and Mariner were ambitious, said Fred Jauss, partner at Dorsey Whitney in Washington and a former attorney with the U.S. Federal Energy Regulatory Commission (FERC), which regulates interstate gas pipelines.

“They aren’t taking their time … we’re all concerned about it,” said Pennsylvania State Senator John Rafferty, a Republican, referring to other state politicians, constituents and first responders.

Energy Transfer spokeswoman Lisa Dillinger told Reuters the schedules were “appropriate for the size, scope, and the number of contractors hired.”

Other companies that planned slower construction of comparable projects have finished mostly on schedule with almost no violations. Canadian energy company Enbridge Inc (ENB.TO), for instance, recently finished a $2.6 billion, 255-mile pipeline – following a path similar to Rover through Ohio and Michigan – with just seven violations. Enbridge did not respond to a request for comment.

HAZARDOUS SPILLS

Energy Transfer, now one of the nation’s largest pipeline operators, encountered large protests led by Native American tribes and environmental activists over the route of its Dakota Access crude oil line in North Dakota in 2016 and has seen protests of Mariner East 2 in Pennsylvania, where opponents have highlighted its safety record on existing pipelines.

The company has had a relatively high incidence of hazardous liquid spills and other problems, according to a Reuters review of data from the U.S. Pipeline and Hazardous Materials Safety Administration (PHMSA).

Energy Transfer’s Sunoco unit ranked third worst among all pipeline companies in average annual incidents between 2010 and 2017, according to the PHMSA data. In total, Energy Transfer and its affiliated companies released more than 41,000 barrels of hazardous liquids causing more than $100 million in property damage, PHMSA data shows.

Bibianna Dussling of Media, Pennsylvania, joined a group of activists protesting Mariner East after learning the project’s route would pass near her daughter’s elementary school.

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“The violations are really meaningless to them,” she said. “You do so much to protect your children day-to-day, and to face something like this, that you feel is so much out of your hands.”

Energy Transfer’s Dillinger said incidents have been sharply reduced since the merger of Sunoco Logistics and Energy Transfer Partners into one company, Energy Transfer, in the spring of 2017. Incidents this year are “trending below industry average,” she said.

HISTORIC HOUSE DEMOLITION

The Rover pipeline attracted additional federal scrutiny when Energy Transfer demolished a historic house along its route.

After Energy Transfer bought the 1843 Stoneman house in Ohio, FERC staff in February 2016 required the firm to come up with a plan to prevent adverse effects on the property, according to a staff’s environmental report.

Instead, the company tore down the house in May 2016 without notifying FERC or the Ohio State Historic Preservation Office.

That led FERC to deny Energy Transfer a so-called blanket certificate that would have allowed the company to construct Rover with less oversight, noting the demolition convinced regulators the company “cannot be trusted” to comply with environmental regulations.

Energy Transfer did not comment on the denial but said in a statement that it had “resolved all outstanding issues” with the demolition and donated more than $4 million to the Ohio preservation office.

DAMAGED WETLANDS

Once Energy Transfer started building Rover, FERC and West Virginia regulators required the company to halt work on parts of the project after violations, including the release of an estimated 2 million gallons of drilling fluid into wetlands near the Tuscarawas River in Ohio in April 2017.

(For a breakdown of Rover’s 681 federal violations, see: tmsnrt.rs/2PUGmYr .)

In Pennsylvania, Mariner East 2 has received more than 80 notices of violation from the state’s Department of Environmental Protection, mostly for accidental release of drilling fluids.

Drilling fluids can impair the natural flow of streams and rivers and harm an area’s ecosystem, said Lynda Farrell, executive director of the Pipeline Safety Coalition.

The Ohio Attorney General filed a lawsuit in November 2017 seeking about $2.6 million from Rover and some of the construction companies building the pipeline for the alleged illegal discharge of millions of gallons of drilling fluids into state waters, among other things. That lawsuit is ongoing.

Energy Transfer’s Dillinger said the company was “disappointed” that the Ohio AG sued after the company tried to resolve issues amicably and that it would continue cooperating with regulators.

“We continue to work closely with both state regulators to resolve any outstanding issues related to our construction,” she said.

GRAPHIC: One gas pipeline, 681 federal violations – tmsnrt.rs/2PUGmYrGRAPHIC: Sunoco’s hazardous spills – tmsnrt.rs/2EHd3E4GRAPHIC: Racing to build pipelines – tmsnrt.rs/2PkLg0n

Reporting by Stephanie Kelly and Scott DiSavino; Additional reporting by Andres Guerra Luz; editing by David Gaffen, Simon Webb and Brian Thevenot

Siemens CEO received pay rise in 2018: annual report

BERLIN (Reuters) – Siemens paid its chief executive Joe Kaeser a total of 7.82 million euros ($8.82 million) during its 2018 financial year, the German engineering company said in its annual report on Wednesday, up from 7.65 million euros a year earlier.

The figure takes into account all different forms of reward, including Kaeser’s fixed salary as well as elements of stock-based compensation at their value on the grant date.

The salary increase of roughly 160,000 euros comes as Siemens reported a decrease in net profit to 5.81 billion euros during 2018, a year in which Kaeser unveiled a new strategy to make the trains-to-turbines maker more nimble and profitable.

Kaeser, who has led Siemens since 2013, unveiled a new plan which will trim the number of Siemens’ industrial businesses to three from five and give them more autonomy.

During 2018 the company has been battling a severe downturn in its power and gas business and floated part of its Healthineers medical business.

The annual report also confirmed the company’s outlook for 2019 and its expectations to close the planned trains unit merger with France’s Alstom (ALSO.PA) in the first half of 2019.

Reporting by Tassilo Hummel and John Revill; editing by Louise Heavens

Wall Street grows cautious but still optimistic: Reuters poll

NEW YORK (Reuters) – Fears of a prolonged U.S.-China trade war and a potentially overzealous Federal Reserve have left Wall Street strategists less optimistic about stock market gains next year, but they still expect a decent increase, a Reuters poll found.

The benchmark SP 500 .SPX will finish 2019 at 2,975, up around 11 percent from Tuesday’s close of 2,682.17, based on the median forecast of 46 strategists polled by Reuters in the last two weeks.

It will end 2018 at 2,800, which would be a near 5 percent gain over last year, according to the poll median.

But the 2019 forecast marks a drop from three months ago, when strategists polled by Reuters predicted the index would reach 3,100 by the end of 2019.

Uncertainty over the outcome of the U.S.-China trade battle – and how long it will go on – has many strategists worried, with some saying any resolution to the conflict should result in a relief rally.

“We’re reducing our targets as much due to risk as anything else,” said Leo Grohowski, chief investment officer of BNY Mellon Wealth Management in New York. “The longer this trade skirmish lasts, the more potential it has to turn into a trade war.” BNY Mellon’s end-2019 SP 500 forecast is 3,000 versus 3,100 in Reuters’ last poll.

But most strategists polled were confident the decade-old bull market will go on for at least another year.

While many said the pace of U.S. profit growth is likely to slow, they said earnings and the economy will still be supportive for stocks.

“The earnings growth rate has peaked, but the absolute level of earnings should continue to increase over the coming year as solid sales growth should continue to drive earnings at a lower, more sustainable pace,” said Sameer Samana, global equity and technical strategist at Wells Fargo Investment Institute in St. Louis.

Strong U.S. earnings growth this year has been fueled in part by the sweeping tax overhaul approved by Congress late last year, with SP 500 earnings in the third quarter estimated to jump 28 percent, on track to be the highest since 2010, according to IBES data from Refinitiv.

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Profit growth is expected to slow to 8.4 percent in 2019.

Stocks have struggled in recent weeks, with the SP 500 last Friday confirming its second correction of 2018. A drop in technology and internet stocks marked the latest swoon and shook confidence in a group that has propelled the market in recent years.

The SP 500 had also entered a correction earlier this year after posting a then-record high in late January, then falling more than 10 percent by early February. That correction lasted roughly seven months, until the index posted a fresh record high in late August.

RISK FROM RISING RATES

Strategists said among the biggest market risks is whether the U.S. and global economies are strong enough to handle much higher interest rates.

The Federal Reserve is expected to hike rates in December for the fourth time this year, but signs of a slowdown overseas and recent market volatility have raised questions about how many rate hikes could come next year. [ECILT/US]

With the U.S. market’s recent losses, many strategists said stocks are fairly priced at current levels.

The SP 500 is now trading at 16 times forward earnings, compared with 17 three months ago and a long-term average of 15, according to IBES data from Refinitiv.

Despite the recent sell-off in technology shares, some strategists said they still like the sector, while more respondents than in the previous Reuters poll said they are leaning toward defensive sectors, including utilities and consumer staples.

Up almost 4 percent since the end of September, the SP 500 utilities index .SPLRCU is the best-performing sector so far this quarter.

The poll also showed the Dow Jones industrial average .DJI finishing 2019 at 26,865, also well below the forecast from the Reuters August poll of 28,700. That would represent a gain of 8.6 percent from Tuesday’s close of 24,748.73.

It will end this year at 25,460, up almost 3 percent from 2017.

Reporting by Caroline Valetkevitch; additional reporting by April Joyner, Chuck Mikolajczak, Sinead Carew, Lewis Krauskopf, Stephen Culp and Alden Bentley in New York and Noel Randewich in San Francisco; Editing by Nick Zieminski

Wall Street to open higher on hopes of trade truce; Powell speech in focus

(Reuters) – Wall Street was set to open higher on Wednesday on hopes of a trade truce between the United States and China at the G20 Summit, while investors looked forward to Fed Chairman Jerome Powell’s speech for clues on the path of interest rate hikes.

While President Donald Trump talked tough ahead of a high-stakes meeting with China’s President Xi Jinping later this week, White House economic adviser Larry Kudlow on Tuesday held open the possibility that the two countries would reach a trade deal.

Industrial heavyweights, a gauge of market sentiment towards trade, rose in premarket trading. Boeing jumped 2.7 percent and Caterpillar rose 0.7 percent.

“Trade has been an issue for a long time and any hint that the China-U.S. trade dispute could be resolved could make a pick up in global growth,” said Kim Forrest, senior portfolio manager at Fort Pitt Capital Group in Pittsburgh.

Meanwhile, Fed Chairman Powell is set to speak on “The Federal Reserve’s Framework for Monitoring Financial Stability” before the Economic Club of New York Signature Luncheon at 12:00 p.m. ET.

Powell has been in recent months criticized by Trump for interest rate increases and other Fed policies. His speech will be parsed for comments on rate hikes next year, especially after Fed officials cautioned over global growth outlook and markets witnessed about two months of volatility.

  • Wall Street grows cautious but still optimistic: Reuters poll

“There’s a lot of chatter that the Federal Reserve may reduce the amount of anticipated rate hikes in the future, and perhaps sell-off some of their balance sheet and that is helping out markets,” Forrest said.

On the macro front, GDP data showed that U.S. economy slowed in the third quarter as previously reported, but the pace was likely strong enough to keep growth on track to hit the Trump administration’s 3 percent target this year.

At 8:32 a.m. ET, Dow e-minis 1YMc1 were up 159 points, or 0.64 percent. SP 500 e-minis ESc1 were up 12 points, or 0.45 percent and Nasdaq 100 e-minis NQc1 were up 40.75 points, or 0.61 percent.

Chipmakers, who get a large portion of their revenue from China, also gained. Nvidia Corp (NVDA.O), Micron Technology Inc (MU.O) and Advanced Micro Devices Inc (AMD.O) were up around 2 percent.

The high-flying FAANG group of members – Facebook Inc (FB.O), Apple Inc (AAPL.O), Amazon.com Inc (AMZN.O), Netflix (NFLX.O) and Google-parent Alphabet Inc (GOOGL.O) – rose between 0.8 percent and 1.7 percent.

Salesforce.com Inc (CRM.N) jumped 8.4 percent after the software maker easily beat analysts’ estimates for quarterly earnings and forecast 2020 revenue above expectations, as more companies turn to its cloud-based services.

Tiffany Co (TIF.N) plunged 10.4 percent after the high-end jeweler’s quarterly same-store sales missed estimates.

Economic data at 10 a.m. ET is expected to show that U.S. new home sales in October has been forecast to have climbed to 575,000 units from 553,000 in September.

Reporting by Amy Caren Daniel in Bengaluru; Editing by Arun Koyyur

Trump says he expects to raise China tariffs: Wall Street Journal

WASHINGTON (Reuters) – U.S. President Donald Trump said on Monday he expected to move ahead with raising tariffs on $200 billion in Chinese imports to 25 percent from the current 10 percent and repeated his threat to slap tariffs on all remaining imports from China.

In an interview with the Wall Street Journal four days ahead of his high-stakes meeting with Chinese President Xi Jinping in Argentina, Trump said it was “highly unlikely” he would accept China’s request to hold off on the increase, which is due to take effect on Jan. 1.

“The only deal would be China has to open up their country to competition from the United States,” Trump told the Journal. “As far as other countries are concerned, that’s up to them.”

Trump, who is due to meet Xi on the sidelines of the G20 summit in Buenos Aires this week, said that if negotiations were unsuccessful, he would also put tariffs on the rest of Chinese imports.

“If we don’t make a deal, then I’m going to put the $267 billion additional on,” at a tariff rate of either 10 percent or 25 percent, Trump told the Journal.

A Chinese official told reporters last week that the two leaders would look to set guidelines for future talks.

“The main issue is how to settle down the trade war,” the official said on condition of anonymity due to the sensitive nature of preparatory negotiations. “I am conservatively optimistic that can be done,” he added.

Trump said the next round of tariffs could also be placed on laptops and Apple Inc’s (AAPL.O) iPhones imported from China, which are part of that $267 billion list of goods not yet hit by tariffs.

Cell phones and computers, among China’s biggest exports to the United States, have thus far been spared as the administration has sought to minimize the impact on U.S. consumers. The Journal said the administration has been worried about a consumer reaction to such levies.

“Maybe. Maybe. Depends on what the rate is,” Trump said, referring to the possibility of tariffs on mobile phones and laptops, according to the Journal. “I mean, I can make it 10 percent, and people could stand that very easily.”

Shares in Apple fell in after-hours trading after the interview was published. An Apple spokesman did not immediately respond to Reuters’ queries.

Apple CEO Tim Cook has personally pressed the issue of tariffs with Trump, telling the president that while there are valid concerns about U.S.-China trade relations, tariffs are not the best way to resolve them.

Despite using contract manufacturers to make most of its products overseas, Apple has also sought to emphasize its contribution to the U.S. economy, saying it plans to spend about $55 billion in 2018 with its U.S.-based suppliers.

Reporting by Eric Beech; Editing by Peter Cooney and Lisa Shumaker

GM to slash jobs and production, drawing Trump’s ire

DETROIT (Reuters) – General Motors Co said on Monday it will cut production of slow-selling models and slash its North American workforce because of a declining market for traditional gas-powered sedans, shifting more investment to electric and autonomous vehicles.

GM’s actions add up to the biggest restructuring for the U.S. No. 1 carmaker since its bankruptcy a decade ago, and mark a turning point for the North American auto industry. U.S. automakers have enjoyed nearly a decade of prosperity since the 2008-2009 financial crisis and the government bailouts of GM and the former Chrysler Corp.

GM’s announcement immediately drew criticism from U.S. President Donald Trump, highlighting the political risks facing GM.

He demanded the automaker find a new vehicle to build in Ohio and added that he had told GM Chief Executive Mary Barra he was unhappy with her decision to cut production at an Ohio factory. Ohio will be a key state in the 2020 presidential campaign.

“I have no doubt that in the not too distant future, they’ll put something else. They better put something else in,” Trump, who has pushed for more manufacturing jobs throughout his almost two years in office, said.

GM did not immediately comment on Trump’s remarks, but the company noted it has other facilities in Ohio including a transmission plant in Toledo and metal center in Parma.

GM and its rivals are facing rising bills for technological transformation, increased risks from U.S. trade policy and investors reluctant to fund their traditional product strategies.

Barra on Monday portrayed the decision to put five North American factories on notice for potential closure and cut nearly 15,000 jobs as necessary to keep the company strong as it plows money into new technology and new businesses such as robo-taxi services.

“This industry is changing very rapidly,” Barra said during a press briefing. “These are things we are doing to strengthen our core business.”

GM shares rose as much as 7.8 percent following the announcement, and were nearly 6 percent higher at $37.97 in mid-afternoon trading. Shares of Detroit rivals Ford Motor Co and Fiat Chrysler Automobiles NV also rose, outpacing the broader market.

GM plans to halt production next year at three assembly plants: the Lordstown small-car factory near Youngstown, Ohio; the Detroit-Hamtramck complex in Detroit; and the Oshawa, Ontario, assembly complex near Toronto. It will also stop building several models now assembled at those plants, including the Chevrolet Cruze, the Chevrolet Volt hybrid, the Cadillac CT6 and the Buick LaCrosse. The Cruze compact car will be discontinued in the U.S. market in 2019, although GM may continue building it in Mexico for other markets, Barra said.

  • Thousands moved out for a new GM factory; now it’s closing
  • Trump says GM ‘better’ add new facility in Ohio after cuts
  • Canada blindsided by GM closure, workers walk out in protest

Plants in Baltimore, Maryland, and the suburban Detroit community of Warren, Michigan, both of which make powertrain components, have no products assigned to them after 2019 and are at risk of closure, GM said. The company said it will also close two unidentified factories outside North America.

“We are right-sizing capacity for the realities of the marketplace,” Barra said.

GM is also moving to cut capital spending overall, even as it says it will double the resources dedicated to electric and self-driving vehicles over the next two years.

GM last year promised to launch a fleet of 20 new battery electric vehicles in North America by 2023, along with at least 10 new electric vehicles in China by 2020. The expenditures to bring those vehicles to production will start to hit with new batteries and body architectures designed to generate profits.

GM also is ramping up hiring at its GM Cruise autonomous vehicle unit, pushing to overcome technical challenges and make good on a plan to launch a robo-taxi service next year.

Even with the higher spending on electric and autonomous vehicles, GM plans to reduce overall annual capital spending to $7 billion by 2020 from an average of $8.5 billion a year during the 2017-2019 period. The automaker has come under pressure from investors to return more cash in the form of share buybacks and dividends.

Cost pressures on GM and other automakers and suppliers have increased as demand has waned for traditional sedans. The company has said tariffs on imported steel, imposed earlier this year by the Trump administration, have cost it $1 billion.

Barra did not link Monday’s cuts to tariff pressures, but said trade costs are among the “headwinds” GM faces as it deals with broader technology change and market shifts.

GM’s actions provoked anger from political figures on both sides of the U.S.-Canada border, and from its main North American unions.

The United Auto Workers, which represents U.S. workers, vowed to fight the cuts. “General Motors’ decision today … will not go unchallenged by the UAW,” said Terry Dittes, the union’s vice president in charge of negotiations with GM. Some UAW workers could land jobs at other GM factories, but many will face uncertain futures unless GM reverses course.

Canadian Prime Minister Justin Trudeau said he spoke with Barra and expressed “deep disappointment.”

In the United States, Trump’s economic adviser, Larry Kudlow, was scheduled to meet with Barra on Monday.

GM said it will take pre-tax charges of $3 billion to $3.8 billion to pay for the cutbacks, but expects the actions to improve annual free cash flow by $6 billion by the end of 2020.

SMALLER WORKFORCE

GM’s North American salaried workforce, including engineers and executives, will shrink by 15 percent, or about 8,000 jobs. The company said it will cut executive ranks by 25 per cent to “streamline decision making.”

Even as GM is moving to lay off salaried staff, the company is hiring. At GM’s Detroit headquarters on Monday, there were signs directing people to a “new hire orientation” meeting.

Barra said GM can reduce annual capital spending by $1.5 billion and increase investment in electric and autonomous vehicles and connected vehicle technology because it has largely completed investing in new generations of trucks and sport utility vehicles. Some 75 percent of its global sales will come from just five vehicle architectures by the early 2020s, which means GM can reduce the people and capital required to keep its product portfolio updated.

Unlike Japanese automakers Nissan Motor Co Ltd, Honda Motor Co Ltd and Toyota Motor Corp, which rely on a more flexible system where they make multiple vehicles at a single plant, GM has too many factories that make just a single model.

The collapse in sales of compact and midsize sedans has hit certain GM models harder than rival Japanese brands. Sales of the Honda Civic are down 11 percent through the first 10 months of 2018. But sales of the Chevrolet Cruze are off 22 percent.

The Hamtramck and Lordstown assembly plants are currently operating on one shift. A rule of thumb for the automotive industry is that if a plant is running below 80 percent of production capacity, it is losing money. GM has several plants running well below that, and Barra said North American operations overall were operating at 70 percent capacity. Consultancy LMC estimates that Lordstown operates at just 31 percent of production capacity in 2018.

Through the UAW, workers at Lordstown have worked to improve quality, cut the number of union locals to make it easier for GM to negotiate and agreed to the outsourcing of some jobs, in a bid to persuade the automaker to add more models to its factory line.

Trump won Ohio in 2016 campaigning on bringing manufacturing jobs back to America.

“So far, President Trump has been asleep at the switch and owes this community an explanation,” U.S. Representative Tim Ryan, a Democrat whose district includes Lordstown, wrote on Twitter.

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At the same time, many of GM’s plants producing its higher-margin trucks and SUVs are running on three shifts, with some running six and sometimes seven days a week to keep up with demand. Some displaced GM car plant workers could find jobs at truck factories, GM officials said.

Rivals Ford and Fiat Chrysler have both curtailed U.S. car production. Ford said in April it planned to stop building nearly all cars in North America. Fiat Chrysler moved even earlier to discontinue most of its sedans.

Reporting by Joseph White, Nick Carey and Paul Lienert in Detroit, David Shepardson in Washington, Allison Martell in Toronto and Allison Lampert in Montreal; Writing by Nick Zieminski; Editing by Bill Rigby, Matthew Lewis and Susan Thomas

United Technologies to separate into three companies

(Reuters) – United Technologies Corp (UTX.N) said on Monday it would separate into three companies consisting of its aerospace, elevators and building divisions, making it the latest industrial conglomerate to pursue such a break-up.

The decision follows the completion this month of United Technologies’ $30 billion acquisition of avionics maker Rockwell Collins, which gave enough scale to its aerospace business to be a standalone company.

The move is in line with plans of other major industrial companies, such as DowDuPont Inc (DWDP.N), Honeywell International Inc (HON.N) and General Electric Co (GE.N), to shed major divisions, as investors assign more value to the parts of these companies separately than to their sum.

Two activist hedge funds, Daniel Loeb’s firm Third Point LLC and William Ackman’s Pershing Square Capital Management LP, had called on United Technologies to pursue a split, and United Technology’s chief executive, Gregory Hayes, had signaled for most of the past year that he was considering the move.

“Our decision to separate United Technologies is a pivotal moment in our history and will best position each independent company to drive sustained growth,” Hayes said in a statement.

United Technologies shares were up 2.2 percent at $130.81 in extended trading in New York on Monday. With a market capitalization of $102.5 billion, United Technologies is one of the biggest companies ever to pursue a three-way split.

United Technologies said it planned to keep the newly acquired Rockwell Collins business, along with its Pratt and Whitney engines unit and aerospace systems. This combine business generated total sales of $39 billion in 2017 on a pro forma basis.

United Technologies said it will spin off its Otis elevators and Carrier air-conditioning businesses tax-free to shareholders.

Otis reported sales of $12.3 billion last year, while the Carrier unit had revenues of $17.8 billion.

Hayes will continue in his current role as United Technologies chairman and CEO after the separation, the company said, with the separation expected to be completed by 2020.

United Technologies raised its 2018 sales forecast on Monday to a range of $64.5 billion to $65.0 billion, up from $64.0 billion to $64.5 billion previously, to include the Rockwell Collins acquisition.

The company expects 2018 adjusted earnings per share of between $7.10 and $7.20, down from $7.20 and $7.30 earlier.

Reporting by Ankit Ajmera in Bengaluru and Greg Roumeliotis in New York; Editing by Sriraj Kalluvila and Leslie Adler

Ghosn suspected of shifting personal investment losses to Nissan: Asahi

TOKYO (Reuters) – Carlos Ghosn, the former chairman of Nissan Motor Co, shifted personal investment losses incurred during the 2008 financial crisis to the automaker to avoid millions of dollars in losses himself, the Asahi Shimbun reported on Tuesday.

Citing multiple unnamed sources, the paper said that when Ghosn’s bank had called for more collateral from the executive, he instead handed the rights over the derivatives trade to Nissan, which effectively shouldered 1.7 billion yen ($15 million) in losses.

Japan’s Securities and Exchange Surveillance Commission (SESC) discovered this incident during that year’s routine inspection, the Asahi said.

Nissan said it could not comment on the report. An SESC spokesman said the watchdog could not comment on individual cases.

Ghosn is being held in detention in Tokyo after his arrest last week for financial misconduct, including allegedly understating his income for years. He has denied those allegations, public broadcaster NHK has reported.

Ghosn, who was unanimously voted out as chairman of Nissan last week, was also ousted as chairman of alliance partner Mitsubishi Motors Corp on Monday.

($1 = 113.4900 yen)

Reporting by Ritsuko Ando, Kaori Kaneko and Takahiko Wada; Editing by Chang-Ran Kim and Stephen Coates

Oil weighed down by record Saudi output; markets eye G20, OPEC meetings

SINGAPORE (Reuters) – Record Saudi oil production pulled down crude prices on Tuesday amid cautious trading ahead of the G20 gathering that starts in Argentina on Friday and next week’s OPEC meeting in Austria.

International Brent crude oil futures LCOc1 briefly dipped below $60 per barrel before edging back to $60.10 per barrel at 0147 GMT, still down 38 cents, or 0.6 percent, from their last close.

U.S. West Texas Intermediate (WTI) crude futures CLc1 were at $51.21 per barrel, down 42 cents, or 0.8 percent.

Saudi Arabia raised oil production to an all-time high in November, an industry source said on Monday, pumping 11.1 million to 11.3 million barrels per day (bpd) during the month.

Since their most recent peaks in early October, oil prices have lost almost a third of their value, weighed down by an emerging supply overhang and by widespread weakness in financial markets.

“The recent weakness seems … to have been driven by a wider impending sense of doom amidst weak equities, geopolitics, subsequent softening demand and increasing supply,” said Jack Allardyce, oil analyst at financial services firm Cantor Fitzgerald Europe.

Looking ahead, Allardyce said “a lot depends” on the outcome of the Group of 20 (G20) meeting in Buenos Aires where the United States and China are expected to address their trade disputes, and on a meeting of the Organization of the Petroleum Exporting Countries (OPEC).

The leaders of the G20 countries, which make up the world’s biggest economies, meet on Nov. 30 and Dec. 1, with the trade war between Washington and Beijing top of the agenda.

OPEC will gather for its annual meeting at its headquarters in Vienna on Dec. 6, and the group will discuss its output policy together with some non-OPEC producers, including Russia.

In favour of low oil prices for consumers, U.S. President Donald Trump has put pressure on his political ally Saudi Arabia, OPEC’s de-facto leader, not to cut production.

Despite this, most analysts expect OPEC to start withholding supply again soon.

“Our base case is for OPEC+ members to see through the pressure from President Trump and concentrate efforts on curbing the current oversupply in the market by conforming to a new production cut agreement next month in Vienna,” said Japan’s MUFG Bank.

“If OPEC plus Russia cannot send a very strong message to the market, prices are poised to fall further, perhaps to Brent $50 per barrel and WTI of $40 per barrel or less,” Fereidun Fesharaki, chairman of energy consultancy FGE, wrote in a note to clients.

“The message must be decisive, firm, and the front must look fully united, to have any chance of slowly reversing the trend,” it added.

Reporting by Henning Gloystein; Editing by Richard Pullin and Joseph Radford