For more than two years, President Donald Trump has pushed for a “new Industrial Revolution” that aims to put American workers first, build new car plants, and engage in trade wars if necessary to open foreign markets.
Detroit has its own vision for a new Industrial Revolution, and it has little to do with erecting higher tariff walls and bulldozing farm fields for new factories. It is focused on artificial intelligence, mapping technology, and changing corporate cultures to create the self-driving vehicles of the future.
The conflict between the auto industry’s present and future was exemplified when General Motors said in late November that it would idle and possibly shutter up to five factories while laying off or buying out 8,000 salaried workers. America’s largest automaker joined the rest of the domestic industry in deciding to eliminate many car models—including the gas-electric Chevrolet Volt—as it recognized the growing sales dominance of trucks and sport utility vehicles in the U.S. market.
Unlike past layoff announcements, this one exploded politically. Elected officials in Michigan and Ohio denounced the moves and congressional representatives from those states got a meeting with GM CEO Mary Barra in early December.
Rep. Debbie Dingell, Democrat and former GM executive, called the moves “a warning” that means “we all must be concerned about protecting jobs and keeping them in this country.” Ohio’s senator Sherrod Brown, who is considering a Democratic presidential run in 2020, labeled it “corporate greed at its worst.”
Trump threatened to pull federal subsidies, including electric vehicle tax credits, from GM and talked about imposing a tenfold increase in car import tariffs, from 2.5 percent to 25 percent, arguing this would boost U.S. car sales and prevent layoffs like GM’s.
For technology experts, by contrast, GM’s restructuring is all about adapting for the future. GM said it is paring down its car lines and potentially shutting plants in a bid to free up money to invest not only in electric vehicles but in expensive self-driving and autonomous vehicle research.
“You have to make changes to innovate and move to a digital economy,” says Darrell West, founding director of the Center for Technology Innovation at the Brookings Institution in Washington. “But in making those changes, some people lose jobs, some plants close, and some communities get hurt. . . . It’s very treacherous politically.”
The domestic automakers already were highly unlikely to build new factories since sales peaked in 2017, are plateauing this year, and may decline in future years. The Detroit Three are likely to frustrate Trump’s new industrialism even further as they lay off and shift workers from underused car plants and pour billions of dollars into research and development.
“I see autonomous vehicles on the road in many major American cities by 2021 and possibly earlier in a few places,” West says.
The unionized Michigan auto-makers have an international battle on their hands. They are also competing with non-union Silicon Valley technology companies such as Google, Uber, and Waymo. The formerly European automaker Volvo, now owned by a Chinese firm, is making advancements in self-driving technology. And more generally, the Chinese are investing heavily in self-driving research because they feel they can compete in this new technology—they were left behind by the 20th-century auto industry and don’t own patents on the older technologies that will be supplanted in the coming years.
Autonomous vehicles are viewed as saving fuel, cutting commute times, reducing pollution, relieving congestion, and providing convenience. Owners of newer vehicles already experience the leading edge of the technology in today’s semiautonomous features, whether it be through adaptive cruise control, automated parking, or emergency braking.
But there are going to be hiccups. Self-driving vehicles will have trouble in bad weather because sensors have difficulty recognizing roadways and surrounding traffic in less than ideal conditions. There is the ominous threat of hacking. America’s poor road conditions remain an obstacle. There is the financial cloud of litigation, namely, the likelihood that juries will react to computerized vehicles killing people with large awards for damages. Public fears were heightened after an Ohio man died in a May 2016 crash with a tractor-trailer in Florida while his Tesla sedan’s autopilot program was on.
Plus there is the unresolved issue of federal regulation. Although all countries have issues with how they regulate vehicles, the weakness in the United States is the lack of uniformity among the 50 states on self-driving cars. Experts say Transportation Secretary Elaine Chao and her agency are trying to help the industry.
“The current administration does seem to be fairly receptive to auto-makers and suppliers developing autonomous technology, adjusting regulation to allow for expedited and driver-free testing on public roads,” says Ed Kim, vice president of industry analysis for the AutoPacific consulting firm in North Tustin, California.
But this technological industrial revolution requires loads of capital. GM’s plant idlings, early retirement offers, and expected layoffs are aggressive moves to address this issue. Ford Motor Co. has been mulling similar moves at a much slower pace, which invited one Wall Street analyst to speculate that the country’s second largest automaker may cut even more jobs than GM, a notion Ford disputes.
“If the capital saved from these actions really [does] help result in GM being a real and profitable leader in autonomous drive technology, that will be what’s remembered rather than the layoffs,” Kim says.
“That statement may sound cold, but these layoffs are another example of the Barra-era GM acting proactively with its eye on the future, unlike the old GM, which was reactive and could hardly see past the next quarter,” he adds.
Morgan Stanley analyst Adam Jonas was blunt in his December 3 investors’ note: “This is not just a GM or a Ford thing,” Jonas wrote. “There are bigger forces at work driving global OEMs [original equipment manufacturers] to rethink the fundamental idea of supporting increasingly obsolete segments, propulsion systems, and geographic regions.”
Trump’s trade wars with the European Union and China don’t help. The steel and aluminum tariffs have increased costs for the automakers, experts note. Trump’s “messaging is stuck in the past when it comes to manufacturing,” Kim says. “Automakers are now truly global entities that rely on resources from around the world to be profitable and efficient.”
Tacking on tariffs makes U.S. automakers less competitive and contributes to GM and Ford’s decisions to cut costs by shedding workers, he says, adding, “The Trump administration’s restriction of free trade . . . has a negative impact on both automakers to have the capital necessary for autonomous vehicle development.”
The president has barely acknowledged the self-driving phenomenon. In March 2017, he visited Michigan to jawbone domestic and foreign auto executives about building new conventional factories and to promote his manufacturing initiatives. He did so at the 335-acre Willow Run site, where bombers were made during World War II but which is now home to the American Center for Mobility—Michigan’s premier site for testing and developing connected and autonomous vehicles.
At the center, Trump never uttered the words “self-driving,” “autonomous” or “connected” vehicles during a speech that focused on traditional car issues. “Now, these hundreds of acres that defended our democracy are going to help build the cars and cities of the future,” he said in his one oblique nod to that future. “So I ask you today to join me in daring to believe that this facility, this city, and this nation will once again shine with industrial might.”
Trump may have to settle for small victories on industrial plant-building. Unlike Ford and GM, Fiat Chrysler Automobiles NV is running its plants at practically full capacity and plans to convert an idled Detroit engine plant into an assembly factory to help build a new Jeep SUV. The move could add as many as 400 jobs by 2020, according to a Detroit News report, though Fiat Chrysler has yet to officially announce the project.
But with a stagnating market, increased costs, and shifting consumer demand away from cars, job losses and factory closings promise to remain an issue.
Bob Lutz, a former fast-jet pilot in the U.S. Marine Corps and Detroit industry veteran, told the Los Angeles Times that the former New York real estate developer should be more sympathetic to the automakers. “I’ll bet,” Lutz said, “he’s shut down some unprofitable hotels, resorts, and casinos in his day.”
