Trump partly to blame for GM restructuring
Experts name multiple factors from shift in consumer tastes to ‘trade headwinds’
TORONTO U.S. President Donald Trump’s trade policies were likely just one factor among many that contributed to General Motors’ decision to shutter multiple plants in the U.S. and one in Oshawa in Ontario, analysts say.
But the closures will undoubtedly sharpen scrutiny of the White House’s “America First” trade agenda — a strategy aimed at preserving jobs in traditional industries through controversial measures including steel and aluminum tariffs that have ultimately squeezed automakers, analysts say.
“Only a few months ago GM said that the Trump tariffs were costing a billion dollars but they were going to wait until after the midterm elections to take action,” said Dennis DesRosiers, president of DesRosiers Automotive Consultants. “It is now past the elections and they are taking action. Partial blame for this goes to Trump and his isolationist policies. It is much bigger than U.S. politics but it certainly is part of the issue.”
GM will shutter its factory in Oshawa as part of a global restructuring as it shifts to manufacturing to electric and autonomous vehicles. The move will see 2,973 jobs cut by the end of 2019 at the Oshawa plant, which has been in operation since 1953. The Detroit firm will also slash a total of 6,705 jobs at plants located in Warren, Ohio, White Marsh, Md., and two separate facilities in Michigan.
Other Ontario manufacturing facilities in St. Catharines and Ingersoll will not be affected.
The restructuring reflects a larger shift in consumer tastes away from sedans to SUVs and low emission vehicles, analysts say.
It is also a response to a business cycle that has passed its peak and is now expected to show declining sales, said Kristin Dziczek, vice-president of industry, labour and economics at the Center for Automotive Research in Michigan.
“The timing of this was a surprise but the substance wasn’t,” Dziczek said. “General Motors has more ability to build cars than people want to buy and particularly sedans. The other two Detroit automakers (Ford and Chrysler) have already announced that they are pulling back from those models so there had to be some correction.”
“Trade headwinds” and in particular, Trump’s tariffs of 25 per cent on imported steel and 10 per cent on aluminum, have also been identified as a key business challenge by more than one automaker as they attempt to make difficult transitions in their product lines and operations. In September, executives Ford Motor Co. blamed the tariffs for taking US$1 billion out of company profits.
“Trade policy does have an impact because it raised costs significantly for steel and aluminum, and the industry told Trump it would do that,” said Mary Lovely, a professor of economics at Syracuse University. “They already weren’t able to sell enough vehicles to keep these lines productive and raising costs by a billion dollars? It doesn’t help.”
Costs for automakers could escalate even further under the United States-Canada-Mexico Agreement, which raises the thresholds on the amount of parts and raw materials in a vehicle that must come from North American sources and places a requirement on the amount of production that must be done by workers earning at least US$16 an hour, Lovely said.
“You can’t blame the USMCA for what happened today, but I do think it will basically kill any hope of us exporting from North America because we won’t be able to compete on cost,” she said. “And I would say there are warning signs flashing for Trump now, especially in Michigan and Ohio. These states do not kid around when it comes to these kinds of jobs and his policies were supposed to protect them.”
Trump told the Wall Street Journal on Monday that General Motors Co should stop making cars in China and make them in the United States instead.
Trump told reporters he told GM CEO Mary Barra he was unhappy with the announcement. He said the decision to halt sales of the Chevrolet Cruze had “nothing to do with tariffs” but was because of poor sales. “Get a car that is selling well and put it back in,” Trump said.
Trade policy does have an impact because it raised costs significantly for steel and aluminum, and the industry told Trump it would do that.