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Ex-GM CEO: Factory closures are decided by the consumer, not the White House

Key Points
  • GM's difficult choice to wind down production at several factories is a response to consumer choices, says former CEO Dan Akerson.
  • GM needs to free up cash to face an uncertain future, he says.
Cadillac's emblem is displayed on the front of a Cadillac ATS Coupe in Detroit.
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General Motors' decision to essentially stop production at five factories in North America and eliminate roughly 14,700 jobs wasn't a political one, despite pressure from leaders in Washington and Canada to reverse course, said former CEO Dan Akerson.

GM's current CEO Mary Barra took some heat from U.S. President Donald Trump, who said Monday that the automaker should put another factory in Ohio, where it plans to wind down production of one plant after 2019. Canadian Prime Minister Justin Trudeau said he was disappointed the company will no longer produce vehicles at a plant in Ontario. The United Auto Workers labor union also said it will fight GM's decision.

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The shares dipped in afternoon trading Tuesday after Trump said he was looking at cutting all of GM's subsidies. It's shares were down by 2.9 percent.

But GM is simply doing what it can to maximize its efficiency and prepare for a still uncertain future in the automotive industry, Akerson said on CNBC's "Squawk on the Street " on Tuesday. Its choice to shift production away from factories that make cars and to make better-selling and more profitable SUVs, trucks and crossover vehicles is simply responding to market forces.

Car sales have dropped, in just five or six years, from representing 50 to 60 percent of the market to 20 to 30 percent of the market.

"This isn't a choice that is being made in the Oval Office or the board room or on the factory floor. They are being made around the kitchen table," said Akerson, who served as GM's CEO from 2010 to 2014. "Fundamentally, the industry is oversupplied right now. GM's plants are running at about 70 to 71 percent capacity. You can't make money and produce cash to fund future ambitions, moves that I think are necessary to position the company for the long term."

In the past, the company was far more reluctant to make these tough choices to secure its future, and suffered for it, he said.

"These decisions weren't made back in the 1990s and early 2000s, and the inevitable came to pass, and the company went into bankruptcy," he said.

Now a new generation of consumers is becoming more influential in the market, and they appear to have different buying habits and an unprecedented interest in other types of mobility products and services, such as ride-sharing.

"Right now, GM is trying to change," he said. "They're looking for a couple more cards, trying to show more flexibility, trying to free up cash flow in the future so they can play the electric game, so they can play the shared ownership game, and it is critically important that the company position itself while it is healthy, not in a crisis."