General Motors' decision to eliminate six cars from its product line carries implications for its future profitability and likely will mean job cuts beyond those already in the works, analysts and economists said.

For 2018, the cars GM plans to cut accounted for about 8 percent of the company's total vehicle sales. Their elimination could result in a hit of $7 billion to $9 billion to GM's yearly revenue, analysts and economists said.

It could also lead to a full percentage point loss in GM's current 17.1 percent U.S. market share, said one economist. That loss could take the automaker years to recapture, if it ever could, considering that GM’s market share has been eroding for decades.

The end result is more jobs will have to be eliminated at GM and its engine plants, said Jon Gabrielsen, an economist who consults with automakers and auto suppliers. He said the engine plants most likely to be impacted are in Flint, Romulus and one in New York, as well as two engine component plants, one in Bay City and one in Ohio.

"There are almost guaranteed to be job losses at the plants that make or made the engines for the terminated vehicle models," said Gabrielsen.

That's because even if GM shifts sales volume from cars to SUVs and pickups, those vehicles' engines likely would be built at different plants, he said.

Beyond 14,000 salaried and production job cuts already announced, GM will need to trim more costs to compensate for the revenue lost from the cars going away, Gabrielsen said. That's especially true, he said, if the company loses sales volume from sedan buyers migrating to other carmakers or buying used vehicles.

The company has said it intends to trim costs by $6 billion by the end of 2020.

"Now that GM is lowering its sales and profits potential further through the elimination of these models and plants, I am raising my estimate of total metro Detroit GM salaried jobs losses to at least 10,000 over the next two years," said Gabrielsen. "That is probably understated."

That's 2,000 more than the 8,000 white-collar job cuts than GM has said it will eliminate in North America this year. Gabrielsen accurately predicted that GM would cut about 7,000 salaried jobs, mostly in metro Detroit, ahead of GM's Nov. 26 announcement.

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Getting ahead of the news

GM says it will replace any lost market share with increased sales of the redesigned 2019 Chevrolet Silverado and GMC Sierra pickups, the new 2019 Chevy Blazer SUV launching now and several new Cadillac SUVs to go on sale through 2021.

“Our strategy is profitable growth, and our aggressive new product launches, all centered in the key growth segments of crossovers, SUVs and trucks, will help us achieve that goal," GM spokesman Pat Morrissey said in an email to the Free Press. "The new product launches will help offset any market share losses from our decision end production of certain passenger cars.”

To temper the troubling news of job cuts, GM is taking the unusual step of hosting its Capital Markets Day for investors on Friday in New York, ahead of the Detroit auto show. Morgan Stanley equity analyst Adam Jonas said in an investor note that GM likely wants to get out ahead of the bad news swirling around it.

"Our 2019 estimates are roughly 30 percent below (earnings) consensus, as we expect significant declines in international profit and margin erosion in North America," Jonas wrote in his note.

GM continues to face harsh backlash following its announcement Nov. 26 that it would idle Detroit-Hamtramck, Lordstown Assembly in Ohio and Oshawa Assembly in Ontario by the end of 2019. It said it would also close a transmission plant in Warren and one near Baltimore.

GM will eliminate the vehicles — all sedans — built at these plants: Cadillac CT6 and XTS, Chevrolet Cruze, Volt and Impala, and Buick LaCrosse.

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GM will likely reiterate Friday that the steps are necessary to withstand "market volatility and to make necessary investments in future technologies, partnerships and business models," said Jonas.

GM faces continued push-back against the cuts in Canada and the United States, with Michigan and Ohio lawmakers criticizing the moves and citing government investment of $11 billion to save GM after its 2010 bankruptcy.

In Canada, GM's plans to shutter the Oshawa plant threaten to reduce Ontario's gross domestic product by $5 billion with a decline of $330 million to Ontario's government revenues in 2020, according to an independent study commissioned by Canada's autoworker union Unifor. The study projects that job losses will mount over time to reach 14,000 in Ontario and 10,000 elsewhere across Canada by 2025.

In the United States, GM said with its increased production of SUVs and pickups, as well as added production of the Chevrolet Bolt electric vehicle, it will be giving more than 2,000 current UAW workers the chance to relocate to other plants.

"For the hourly employees at the four unallocated U.S. plants, we have opportunities at other GM plants where we are launching these products in the growth segments," said Morrissey. Those include plants in Flint; Spring Hill, Tennessee; and Arlington, Texas.

GM name change?

One way to polish its image, Jonas said, might be a name change.

"Several investors have asked us about the potential for a name change to accompany a radical strategic shift for the company," wrote Jonas. "We have no knowledge or strong opinion on a potential name change, but do not exclude the possibility of such an action being considered by GM's leadership to help foster perception and cultural change."

GM is not the first carmaker to lay out a business transformation.

In 2016, Fiat Chrysler announced the Dodge Dart and Chrysler 200 sedans would be discontinued as it refocused its efforts on building its popular Jeep SUVs and Ram pickups and boosted its electric vehicle lineup.

Early last year, Ford announced it would eliminate its traditional cars from the U.S. lineup except the Mustang. It loses the Fusion, Focus, Fiesta and Taurus so it can focus on SUVs and pickups.

Auto dealer Bob Shuman said FCA made the right move. It gauged consumers' shifting tastes away from sedans.

"Our year-over-year sales continue to grow. We’re still selling the same or more each year in total units whatever the mix is," said Shuman, owner of Shuman Chrysler Dodge Jeep Ram Walled Lake. Shuman's store sold 2,700 new and used cars in 2018 and, despite still selling the Chrysler 300 and Dodge Charger and Dodge Challenger cars, the hottest movers have been the Jeep Renegade and Compass SUVs.

“The Jeep Renegade and Jeep Compass are smaller vehicles and are home runs," said Shuman. "Those vehicles have stepped into that niche for people who want a smaller vehicle."

Economist Gabrielsen said FCA was in a position of strength when it embarked on the decision to trim the Chrysler 200 and Dodge Dart.

"It already had significant momentum building" when it made the move, said Gabrielsen.

Over a 10-year period, FCA has gained a half-percentage point in market share each year, almost the exact same as GM has lost each year. So GM is now employing the same strategy as FCA, but from a position of weakness, he said.

"It's cutting one leaky boat in cars for another leaky boat in crossovers and SUVs," said Gabrielsen. "Over the past decade GM has lost 4 points of market share in the crossover/SUV sector ... with no indication of any end in sight."

Even as GM prepares to introduce new model SUVs such as the Chevrolet Blazer being built now and the Cadillac XT6, all it will do is reduce the average volume for those SUVs GM already has, not gain overall share for GM, said Gabrielsen.

"GM has been adding new models for a while, and rather than gain total share it has lost the share," Gabrielsen said. "Thirty years ago, there were only about a dozen SUV model; today there are over 100 all fighting for share."

Not only was Jeep the brand best suited to pursue this strategy, he said, but FCA "moved first and claimed that strategy."

The slow decline

Some GM sedan buyers who will shift to GM's SUVs and pickups, analysts said.

"These vehicles going away will eventually be replaced with more light truck models, likely battery electric vehicles, but not until early 2020s," said David Whiston, U.S. autos equity strategist at Morningstar Research Services. "So GM won't lose all those owners. Some say Chevy Cruze owners may want to go bigger anyway for their next vehicle, but it's hard to put a number around that."

Buick GMC dealer Sam Slaughter said sales of the Buick LaCrosse sedan have been stalling at his store in suburban Detroit in the last 24 months.

"It was a slow decline, but suddenly nobody wanted to look at them anymore. Their neighbor got an SUV or crossover and suddenly that’s what they want," Slaughter said. "The crossover is popular because nobody wants to drive their dad’s sedan.”

Sellers Buick GMC in Farmington sold 3,500 new and used cars last year. Slaughter is not worried that losing the sedan will mean losing customers. He said those who come in for a LaCrosse are already opting for a similarly priced an Envision or Enclave instead.

“My thoughts are that people have already made the shift," said Slaughter. "The fuel economy advances, the features and sizes of these SUVs and crossovers have really made the sedan obsolete. There are certainly some customers who want to buy sedans, but in our market, customers have already made that decision.”

The bottom line

That may be the case in Detroit, but nationally the numbers don't reflect that yet.

For the year, sales of the Buick Enclave rose only 2.2 percent and the Envision's sales are down 26.5 percent compared with 2017. Sales of the LaCrosse were down 23 percent.

For 2018, GM sold about 3 million vehicles in the United States. Of those, the six cars it will eliminate composed 250,743 in sales or about 8 percent of GM's total U.S. vehicle sales.

Analyst Stephen Brown said some of the higher car sales are because GM was forced to offer generous customer discounts on them to move car inventory given buyers' preferences for SUVs and pickups.

"This has pressured the margins of passenger cars, which were already thinner than those of SUVs and pickups," said Brown, a senior director at FitchRatings.

GM has made it clear in the post recession that its focus is, "on the bottom line, rather than the top line," said Brown. "The company will forego revenue that does not carry a suitable profit margin along with it."

Put another way, dealer Sam Slaughter said, "GM is reacting to the market rather than arbitrarily pulling the plug on products. I see a lot of happy faces driving away in SUVs.”

Contact Jamie L. LaReau: 313-222-2149 or jlareau@freepress.com