Just to be clear, General Motors is one “wrong” move away from a scenario that sees Donald Trump attempt to commandeer the company’s strategic vision and reshape it in the MAGA image.
Monday’s announcement that the company will be slashing 14,000 jobs, shuttering plants and doing away with models that aren’t selling was received warmly by markets. The shares surged nearly 5%, for their fifth best day of 2018.
CEO Mary Barra pitched the momentous decision as an effort to ensure that the company remains nimble in the face of shifting consumer preferences and she also tacitly suggested that the best is probably behind us in terms of the U.S. economy.
Barra emphasized investments in electric cars and autonomous vehicles and explicitly stated that the time to implement these changes is now, while the company and the economy are still strong.
The Trump administration is not amused. Context is critical here and I don’t just mean with regard to GM’s brush with death in 2009. Rather, I mean with regard to the company’s relationship with Donald Trump.
Back in June, GM warned the Commerce Department that Trump’s tariffs were likely to mean job losses in America, something trade hawks like Peter Navarro did not want to hear. In an absurd CNN interview aired in late June, Navarro accused GM (and Harley) of “speaking through forked tailpipe”, for instance.
But let’s trace the history back a bit further.
Early last year, Trump hosted the CEOs of GM, Ford and Fiat Chrysler in a push to promote American manufacturing. “We have a very big push on to have auto plants and other plants – many other plants,” he said at the start of that meeting, adding that “it’s happening.” Here’s what he tweeted after that meeting, just for old time sake:
Great meeting with Ford CEO Mark Fields and General Motors CEO Mary Barra at the @WhiteHouse today. pic.twitter.com/T0eIgO6LP8
— Donald J. Trump (@realDonaldTrump) January 25, 2017
A little over a year later, Trump famously took credit for GM’s decision to shutter one of its plants in South Korea. Here’s the clip, from February:
The problem? That had nothing to do with Trump. Here’s what GM said the day after Trump made those comments:
The announcement is related to our need to restructure our business in South Korea. Depending on the outcome of those restructuring efforts there could be broad global implications but as we said yesterday we need the full engagement of all stakeholders with a sense of urgency.
In short, Trump has variously attempted to get GM on board the MAGA wagon and that effort hasn’t always been entirely successful. Sometimes, the company has made him look foolish, although probably not by design.
Monday’s news is a grievous blow to Trump’s contention that his policies are the only protection the American blue collar worker will ever need. GM’s announcement confirms many of the realities that Trump spends every waking hour attempting to downplay. It thus comes as no surprise that he’s furious. Here’s what he told reporters on Monday in the latest edition of America’s favorite daytime talk show, “Chopper Talk”:
And that was tame by comparison to comments published by the Wall Street Journal on Monday afternoon. As alluded to here at the outset, Trump sounds like he will attempt to strong arm the company if Barra doesn’t “fix” this situation. Here’s what he said in the interview:
They better damn well open a new plant there very quickly. I love Ohio. I told them, ‘you’re playing around with the wrong person. I said, ‘I heard you’re closing your plant’. It’s not going to be closed for long, I hope, Mary, because if it is you have a problem.
Not to put too fine a point on it, but that is unconscionable and rife with irony. Trump is effectively suggesting that he will pressure GM into making decisions that run counter to what management believes is necessary to ensure the company doesn’t run into trouble. To support his bellicose stance, the President is citing all that the government has done for GM, but the whole point of the company’s strategy is to make sure GM remains viable so that it doesn’t end up needing help again.
Of course Trump doesn’t care about the viability of GM or about the thousands of workers who are about to lose their jobs. All Trump cares about here are the optics and the extent to which this undermines his efforts to lean against economic reality by insisting that he can roll back the clock to a bygone time when these American industrial giants were the envy of the world. That was never realistic and paradoxically, his policies on trade are undermining companies like GM and Harley, something executives have tried desperately to communicate over the past 12 months.
At a 2017 rally held just miles from Lordstown (the location of one of the factories targeted for closure), Trump said this:
I said, those jobs have left Ohio. They’re all coming back. They’re all coming back. Don’t move, don’t sell your house.
How’s that working out, sir?
Predictably, GM is being cast as the villain here, and not just by Trump. Ohio Democrat Tim Ryan characterized the news as a “bad combination of greedy corporations and policy makers with no understanding of economic development.” The latter is a jab at the President, but the “greedy” label was also applied to GM by Ohio Senator Sherrod Brown. “[It’s] corporate greed at its worst”, Brown said.
These folks can rant and rave all they want, but the bottom line here is that this is what happens when capitalism meets economic reality meets a snake oil salesman peddling dreams to disaffected blue collar workers.
In any event, you can expect Trump to ratchet up the rhetoric going forward and you shouldn’t be surprised if you look up six months from now and discover that “America first” entails casting America’s most iconic brands as public enemy No. 1.
Since when do supposedly free market Repubs try to run businesses and advise (threaten) them? No one likes people losing their jobs but companies have the right to make decisions in the best interest of stakeholders. Some do better than others and favor shareholders or mgmt over others. Repubs should create a level playing field and let the market allocate resources appropriately rather than take over mgmt or bully mgmt. Socialism and communism does not work T!!!!
My hope is that these workers find better jobs at better companies. But we need to have smart people feel the freedom to invest and take risk to achieve reward.
SAD!!!!
How much has the Trump Organization invested in Lordstown or anywhere else in Ohio, Michigan, Wisconsin?
Trump’s steel and aluminum tariffs hastened this decision. GM was quick to take U.S. (and Canadian) government’s billions of dollars in the 2009 credit crunch to avoid bankruptcy (and the worker’s contributed, too). How soon GM forgets. It could be argued this is to avoid the next bankruptcy…but shipping the auto, SUV and light truck assembly jobs to Mexico doesn’t ‘pass the smell test.’
When Government Motors, and so many other multi-national corporations have to woe overseas $$$ (USD dollars that have moved overseas due to the trade imbalance) in order to stay solvent, the United States has a trade problem that needs to be addressed. This blog would lead you to believe there is no problem at all, and the status quo is marvelous. This position is far from accurate or factually honest.
The defense of free trade as an argument against what the Trump administration is trying to accomplish underlies all of the dribble on this blog. The issue is not free trade, but rather the one-sided trade model that commenced in 1994 when NAFTA first went into effect creating the Mexico trade imbalance and China devalued their currency by 30% and never revalued as the trade imbalanced ballooned (about 10 other foreign countries make up the majority of the trade imbalance). Wall Street loves the model because the massive dollar imbalance creates the opportunity for countless deals to be done with associated fees to reinvest the trade flow imbalances – can you say tech bubble, FAANG stocks, CTA, Bitcoin, etc.
Once a dollar, always a dollar, and the perpetual trade imbalance that blossomed post 1994 that has been financed almost 1:1 by increasing levels of US National Debt has created very large pools of US dollars not controlled by entities or people within the boundaries of the United States. As a consequence, it means that increasingly the USD can be used in a ways that are not necessarily in the best interest of a majority of working Americans. In fact, the investment in China (electric cars) and Mexico (production) that GM is making is being done with American dollars, and therefore indirectly being underwritten by the American people. How do you suppose GM is going to recoup that investment, perpetually larger US National debt handed out to citizens to buy the vehicles??? That is the assumption that underlies the current “Wall Street free trade model”, one Henry Ford figured out long ago did not work unless there was a strong middle class to buy the vehicles being produced. Apple by moving all of its I-Phone production to China has already made this classic short-sighted mistake, as have many other multinational businesses over the past 25 years. There is little economic rational for the movement of high technology production for US consumption overseas other than the strict “non-free trade” rules in place which require companies to move their production in order to gain market access. These are hideous non-free trade barriers, which over the past 20 years have done substantial damage to the US economy and working class. But then again, what would an arm-chair market quarterback like the person that wrote this article actually know about such issues?
If we lived in a free trade world, these trade imbalances would not remain structurally intact for very long, but they have and continue.
The writer of this and other articles that involve US trade policy needs to drop the misguided political agenda posturing. You sound like a minion for Xi Jinping, President of the People’s Republic of China, who by the way is General Secretary of the Communist Party of China, the operative word being Communist where the definition of free trade is far different than the one used in capitalist economic textbooks.
It’s not the potus’s job to tell any company how to run its operations, let a loan a potus that has BK’d more than a handful of companies and sought and found financial salvation with foreign monies. The potus needs to stay in his own lane…..his job, at the very least, is to level the international playing field & keep it that way…..not run GM.