Chief Executive Officer Mary Barra says a plan that will save General Motors about $6 billion by laying off 14,000 workers and idling five North American factories illustrates the carmaker’s resolve in the face of industry challenges like higher supply costs and shifting customer preferences.
It’s a quality the Detroit-based company, and Barra herself, will need in order to weather the backlash from Washington, where employees are better known as voters, all too likely to channel any economic frustrations into ballot-box decisions.
The uproar illustrates the often-rocky intersection between the interests of Wall Street, which largely applauded GM’s effort to free money for investment in electric and self-driving vehicles while focusing on lucrative sport-utility vehicles, and those of the nation’s capital.
Inside the Beltway, GM’s actions were perceived as undermining President Trump’s promises to restore factory jobs in states like Michigan and Ohio, which he captured in 2016 and are crucial to his re-election bid two years from now.
They prompted furious criticism not only from the White House but members of Congress on both sides of the aisle.
“The U.S. saved General Motors, and for her to take that company out of Ohio is not good,” Trump told reporters, referring to the government’s bailout of the automaker during the Great Recession. “I told her I’m not happy about it at all.”
A day later, the president clarified the extent of his displeasure, threatening on Twitter to revoke all of the automaker’s federal subsidies.
“It’s a great disappointment,” said Larry Kudlow, the president’s top economic adviser, especially with GM’s announcement coming just days before the scheduled signing of a revised trade agreement with Mexico and Canada that provides higher incentives for building cars in North American factories that employ higher-paid workers.
While Kudlow offered few details on GM subsidies the White House is assessing, 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 had already sold more than 190,000 such cars as of this fall, 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.
While GM was careful to attribute its cutbacks to slowing sales of small cars and sedans like the Chevrolet Impala and Cruze, which will be discontinued in the U.S., the company noted in July that raw material costs — primarily for steel — rose $300 million in the second quarter as Trump’s double-digit levies on steel and aluminum imports took effect.
The tariffs, which the president intended to buoy U.S. metals producers and justified on national security grounds, have pushed up costs for automakers and others that rely on the metals.
GM predicted in July that raw material price increases and currency-exchange fluctuations would cost it $1 billion this year, and economists have long warned that Trump’s tariffs on allies and competitors alike risk undercutting the economic benefits of last year’s GOP-led tax cuts.
White House Press Secretary Sarah Sanders, however, deflected any suggestion that Trump’s policies were to blame for GM’s layoffs.
“This is not about the president,” she said. “It’s about the fact that they’re making a car, frankly, that people don’t want to buy. And hopefully, they will make adjustments and make changes and bring those workers back.”
Washington’s criticism in the days following GM’s announcement drained much of Wall Street’s initial enthusiasm for the plan. While the automaker’s shares climbed 4.8 percent on Monday, all but 80 basis points of the gain were gone by Wednesday morning.
Detroit-based GM owes residents of Ohio, where its Lordtown plant is among those idled, more answers, said U.S. Sen. Sherrod Brown. A Democrat, he won re-election in the state easily this year even though Trump had carried it by a wide margin two years earlier and campaigned for Brown’s opponent.
“Taxpayers rescued GM,” Brown added, referring like Trump to the financial crisis bailout in which the government invested $51 billion to prop up the automaker, ultimately losing about $11.2 billion.
The president himself retweeted a suggestion that GM be forced to compensate the government for that loss if it doesn’t keep jobs in the U.S.
Earlier in 2018, the automaker cut a shift at the Lordstown plant in Ohio’s Mahoning Valley on the same day that it announced plans to build the Chevy Blazer sport-utility vehicle in Mexico, noted Brown, who’s contemplating a 2020 run for the presidency himself.
Adding insult to injury, Brown added, is the fact that GM received a massive break on its income-tax bill when the GOP-led Congress reduced the top corporate rate to 21 percent from 35 percent in late 2017.
While Democrats lambasted the move as a giveaway to Republican donors at the expense of the middle class, the GOP had said it would fuel hiring. Trump himself was similarly upbeat about the bill’s impact in a February speech in Ohio.
“Your paychecks are going way up,” he told his audience in Blue Ash. “Your taxes are going way down. And right now, for the first time in a long time — and you’ve seen it — factories are coming back. Everything is coming back.”
Against that backdrop, it was no surprise that a president who prides himself on taking the fight to his opponents would come out swinging. Trump had a similar reaction when Harley Davidson blamed his tariffs for a decision to move some motorcycle production overseas from Wisconsin, another Rust Belt state and one that Trump won by just 23,000 votes.
Indeed, without the 44 electoral votes contributed by Wisconsin, Michigan and Ohio collectively, the outcome of the 2016 election would have been dramatically different: 271 votes for Democratic contender Hillary Clinton and just 260 for Trump.
“I was very tough,” the president told reporters, recounting his conversation with Barra after he learned of the plant closings. “I said, ‘You know, this country has done a lot for General Motors. You better get back in there soon. That’s Ohio, and you better get back in there soon.’”
In the aftermath of GM’s announcement, it’s important that members of Congress “let our voices be heard,” said Rob Portman, Ohio’s Republican senator. He had urged the company to bring new products to the Lordstown plant as it scaled back production of the Chevy Cruze earlier in 2018.
“We’ve got a great plant, we’ve got a great workforce,” Portman told reporters on Capitol Hill. “The plant has been relatively recently revamped, so it’s ready to go with another car, and they said, ‘Well, we’re not selling small cars.'”
The answer to that dilemma is building vehicles in Ohio that are selling well, said Portman, echoing Trump.
“The ultimate transition,” he said, is not the Lordstown factory being idled but the transition to “a new vehicle, a new future and a new life for the plant.”
While Portman wants GM to achieve its goals with electric vehicles, demonstrating American prowess against China — which is trying to corner the market on them, his support isn’t unconditional.
“We’ve got to be sure that we respond” to China, he said. “We want GM to do that, but we also want to be sure they’re making those vehicles in the U.S.”
