GM and oil industry
Automaker’s pivot to electric vehicles should send message to oil companies.
Given the oil industry’s dominant role in Texas’ economy, this state has no choice but to pay close attention when General Motors announces it is shutting down production at five plants and laying off up to 14,000 workers in the United States and Canada.
GM is primarily responding to market trends that show Americans are buying fewer sedans, but it is also positioning itself for a future that includes more electric vehicles.
It’s a bold step by GM to stake its future on what is currently only 3.5 percent of the automobile market. “Hybrid cars are not doing very well right now; that’s why GM is cutting the Chevy Volt,” said Bernard Swiecki, a senior analyst at the Center for Automotive Research in Ann Arbor. “In the past GM has been criticized for not getting ahead of trends; this time it’s trying not to be as reactionary.”
Ford actually beat GM in acknowledging market trends when it announced in April that it would no longer make the Taurus, Focus and other sedans while adding five new SUVs to its production lineup. Ford also said it would spend $11 billion to launch 40 new electric vehicles by 2022, including 16 full battery-electric vehicles.
For Swiecki, news like that is just more reason energy firms, including those in Texas, should be paying attention. “GM’s announcement sends a message to the oil industry that it should continue to research alternative fuels and make cars that are more fuel efficient,” Swiecki said.
Some oil companies seem to be paying more attention to that message. BP announced in June that it was buying Chargemaster, the United Kingdom’s largest electric vehicle charging station company, and investing in two other companies, one that also makes mobile charging stations and one that makes “ultra-fast” batteries.
Swiecki noted that GM’s decision was also related to President Donald Trump’s imposition of new tariffs on steel and aluminum. They’re expected to cost GM and Ford $1 billion or more each.
Trump fired back this week, demanding the automaker keep open a plant in Lordstown, Ohio. “That’s Ohio, and you better get back in there soon,” said Trump, who turned Ohio from blue to red in 2016. Trump later threatened to cut all federal subsidies to GM, including tax credits for electric cars.
Trump’s tantrum was predictably focused on his own political fortunes — he’s promised repeatedly that manufacturing jobs would grow with him in the White House — but his frustration is understandable. The plant closures could hint that America’s booming economy is slowing. The Conference Board think tank announced Tuesday that its survey showed consumer confidence dropped slightly in November. Meanwhile, the Census Bureau announced Wednesday that new home sales fell nearly 9 percent in October from the month before.
GM’s announced layoffs added to the week’s negative vibe. The automaker’s response to market trends makes sense, but announcing layoffs so close to Christmas stinks. GM should cushion the news with ample notice for workers whose lives will be turned upside down. It’s also possible that GM is positioning itself for next year’s negotiations with the United Autoworkers union.
“GM’s announcement didn’t actually say it was closing any facility,” Swiecki noted. “It said it had ‘no products allocated’ to the designated plants, which leaves open the possibility that one could remain open.”
But the GM decision should send ripples beyond its own workforce, and even beyond worries about a slowing economy. Even if more than one GM plant scheduled to shut down survives, the auto industry is unlikely to retreat from its long-range goal to build more vehicles for American consumers that use less, if any, gasoline. That has deep implications for Houston, and for Texas.
It’s why Tom Kolditz, executive director of Rice University’s Institute of New Leaders, said oil companies should be doing more to prepare for that day.
“It’s hard for the oil companies to change,” Kolditz said. “It’s like betting against yourself.”
Texans should hope oil companies heed that advice. GM’s bet on electric vehicles doesn’t signal a wholesale move away from fossil fuels — not yet and maybe not for many years. But it’s a reminder that consumers and the companies that cater to them will continue to look for alternatives to fossil fuels.
The oil companies that do so much for Houston’s economy would be wise to make their own transitions to becoming more diversified energy firms.