GM has lost much of the gains from Wall Street’s initial enthusiasm for a $6 billion cost-cutting plan as President Trump pressures the automaker to change course on factory closings and layoffs.
Shares in the Detroit-based company fell as much as 4 percent to $36.17 in two days of New York trading as Trump threatened tax breaks for electric vehicles, which Chief Executive Officer Mary Barra sees as a linchpin of future sales, and lawmakers from both parties condemned GM’s moves.
While the shares have since begun to rally, the earlier decline had wiped out almost all of a 4.8 percent jump on Monday, after Barra outlined a plan to idle five North American factories and lay off roughly 14,000 workers while investing in production of all-electric vehicles as well as self-driving cars.
“We are taking these actions now, while the company and the economy are strong, to stay in front of a fast-changing market and to capitalize on growth opportunities as we push to achieve a vision of a world with zero crashes, zero emissions, and zero congestion,” the CEO told investors.
The move comes with heavy costs for GM workers in communities like Lordstown, Ohio, where a plant building Chevrolet Cruze vehicles would stop production, undermining Trump’s promise that factory jobs would return to the state. Trump won Ohio and its 18 electoral votes in the 2016 election, pulling out a surprise victory against Democrat Hillary Clinton, and it’s widely viewed as crucial to his 2020 re-election prospects.
Very disappointed with General Motors and their CEO, Mary Barra, for closing plants in Ohio, Michigan and Maryland. Nothing being closed in Mexico & China. The U.S. saved General Motors, and this is the THANKS we get! We are now looking at cutting all @GM subsidies, including….
— Donald J. Trump (@realDonaldTrump) November 27, 2018
Pointing out that GM benefited from a $51 billion government investment that enabled the company to survive the financial crisis and a 2009 bankruptcy, Trump has backed up a suggestion the automaker be forced to repay the $11.2 billion the U.S. Treasury lost on the deal if it doesn’t keep jobs in the U.S.
He and top economic adviser Larry Kudlow said the administration would consider halting all GM’s federal subsidies. Among them is a tax credit of up to $7,500 on electric vehicles, an incentive that’s phased out after a manufacturer sells 200,000 such cars in the U.S.
GM has already sold more than 190,000 such cars, according to the EVAdoption newsletter, and its CEO has urged Congress to expand the program.
A bill sponsored by Sen. Jeff Merkley, an Oregon Democrat, would do that but it’s currently bottled up in the chamber’s Finance Committee, and Trump’s opposition would be yet another obstacle. The company’s cutbacks affect one plant in Canada and a total of four in the U.S.
Sen. Rob Portman, an Ohio Republican, said he wants GM’s investment in electric vehicles to succeed but the company owes Ohio residents a chance to participate in the profits.
“China is trying to corner the market on electric vehicles,” he told reporters on Capitol Hill this week. “We’ve got to be sure that we respond. We want GM to do that, but we also want to be sure they’re making those vehicles in the U.S., and what better place than the Lordstown plant that has been so faithful to GM over the years?”
