Trump's views on the US auto industry are childish and intended only to rally his supporters (GM)
On Monday, General Motors announced that it would idle two car factories in Michigan and Ohio, as well as transmission plants in Michigan and Maryland (a third idled assembly plant is in Canada.) The factories make mostly sedans, and those vehicles have been declining in popularity as consumers switch to SUVs.
According to the Wall Street Journal, "Trump said he told [GM] CEO Mary Barra that she should stop making cars in China and open a new plant in Ohio to replace the ones where the company is planning to end production."
"I love Ohio," Trump told the Journal. "I told them, ‘you’re playing around with the wrong person.'"
Typical. Trump has never shown any meaningful grasp of the modern, global auto industry, preferring instead to reduce the business to a crude calculation of what's good for Trump.
In that context, the decision to phase out production of the only car that the Lordstown, Ohio, plant is building — smack in the heart of swing-state Trump country — is a disaster for the chief executive. The Chevy Cruze is on track to sell nearly 100,000 fewer units in 2018 than 2017. The factory was down to single shifts. Everyone in the auto industry and in Ohio's government knew this situation couldn't continue.
Business reality vs. Trumpian fantasy
The best-case scenario for the factory is that it would be re-tooled to build pickups or SUVs, but GM hasn't said anything about doing that. The company made this week's moves to get its manufacturing capacity correctly aligned with consumer demand and to prepare for a US sales downturn. And even if GM does intend to shift to different models at Lordstown, the Cruze will be phasing out through 2019 and the factory's fate won't know until after the United Auto Workers and GM forge a new contract next year.
On China, Trump is equally misguided. GM builds exactly one vehicle there that's exported to the US in significant numbers — and that's being generous, as only about 30,000 Buick Envisions will be sold in all of 2018. The vehicle was developed for the Chinese market and is only sent to the US to provide Buick dealers with some options in the crossover segments.
Last year, Trump told Ohioans they'd see job gains, not losses, and he might have thought a huge corporate tax cut passed in 2017 would secure that outcome. But it wasn't going to happen, and although GM has been investing in tomorrow, it's largely been focused on new technologies, such as electric and self-driving vehicles, as well as launching new SUVs and pickups.
Now Trump is blustering about the inevitable, to mask the fact that he sold Ohio voters on a fantasy future. He also overlooked that a financially healthy GM won't operate like the basket case it was during the financial crisis, but instead will maneuver more like an independent country.
When GM is strong, it operates like a country
Beyond that, if he thinks GM is playing around with the wrong person, he's underestimating CEO Mary Barra, who has been unflinching in the face of tough decisions and has no intention of allowing GM to flirt with bankruptcy and government bailout ever again.
The real issue is that he's been caught in a deception about auto-industry economics, one that the potential impending layoffs of thousands of workers in Ohio (and, for that matter, Michigan) will make impossible to perpetuate. It hasn't helped that his trade war with China and his dismembering of NAFTA have increased carmaker's raw-materials costs and introduced uncertainly around cross-border supply chains. To top it all off, his EPA's re-jiggering of fuel-economy standards has undermined the value proposition of vehicles such as the relatively high-MPG Chevy Cruze.
Trump's relationship to the car business has been childish and largely incoherent, driven by giveaways that weren't going to be reciprocated, deals that he got hoodwinked on, and hiring demands that were either impossible or inconceivable on timetables that would fit with the US election cycles.
His flailings weren't going to hold up in a recession, anyway — and now GM has pulled foward some recession-level decisions that the pre-bankruptcy giant would have stalled on until it was too late. Ohioans should now see that the emperor has no clothes, that his sound and fury signifies nothing — or whatever literary cliché best captures the sad reality that a gigantic global corporation was somehow going to bend its entire business to the task of getting 51% of the Buckeye State to re-elect him.
via Business Insider https://ift.tt/1IpULic
November 27, 2018 at 12:00PM