Strategy

GM Places $5.4 Billion Bet on U.S. Expansion

GM hopes the investment will allay United Auto Workers concerns about the company's investment in Mexico.
Matthew HellerApril 30, 2015

China and Mexico may be the most popular places for global vehicle production these days. But General Motors is making a big bet on the United States, announcing Thursday it will invest $5.4 billion in U.S factories over the next three years.

The investment includes $783.5 million for Michigan facilities, with $520 million going to a plant in Lansing that makes SUVs, $139.5 million to a new body shop and improved stamping facilities in Warren, and $124 million to a Pontiac center that makes steel body panels. Since it came out of bankruptcy in 2009, GM has invested about $16.8 billion in U.S. plants.

“These investments are evidence of a company on the move, strategically investing in the people, tools and equipment to produce cars, trucks and crossovers that are built to win in the marketplace,” GM North America President Alan Batey said.

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As Bloomberg notes, the largest U.S. automaker also has been investing outside its home country. A an executive at a GM joint venture in China said last week that the j-v plans to spend $16 billion by 2020 to expand in that market, and GM in March said it will put $5 billion into plants in Mexico.

The United Auto Workers union is concerned about the company’s growing investments in Mexico. But Thursday’s announcement may ease those concerns ahead of quadrennial labor negotiations. The current contract expires in September.

“They announced $5.4 billion in investment, I’m happy,” Cindy Estrada, a union vice president, said. “Do I want more? Yes.”

GM’s 2014 earnings before interest and tax-adjusted margin in North America was 8.9% and 4.2% for the entire company. GM is aiming for a 10% return in North America by 2016 and 10% for the entire company by early next decade.

“The common thread among our investments is the focus on product improvements that benefit customers,” Cathy Clegg, vice president of GM North America Manufacturing, said in a news release. “Together with our UAW partners, we’re working hard to exceed consumers’ ever-increasing quality expectations.”

GM said it would provide details about the remaining $4.6 billion in U.S. investment “over the next several months.”

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