GOOD FOR GM? GOOD FOR AMERICA.
Time was when what was good for General Motors was good for the United States. Or that’s approximately the response GM CEO “Engine Charlie” Wilson gave to a Congressional committee when asked about potential conflicts of interest if, as President Dwight Eisenhower had proposed, he became Secretary of Defense. Wilson didn’t actually speak what became the famous phrase. He merely said he’d always thought what was good for GM was good for the country and vice versa, so that such conflicts would almost never arise. (He was called Engine Charlie to distinguish him from another Charles Wilson, the former president of General Electric, who served in the Truman Administration and for disambiguation was known as “Electric Charlie.”)
But then, time also was when the head of GM was thought by the U.S. president to understand America’s national interest so implicitly he could easily switch to Secretary of Defense. That seems not to be the case anymore. In its 1,000-word submission to the U.S. Commerce Department about Trump’s proposed auto tariffs, GM does accept the premise that what’s good for GM is good for the U.S. But it says auto tariffs would in fact be bad for GM and, ergo, bad for the country.
The administration might be tempted to tweet back that the interests of GM and the U.S. don’t coincide, despite what Engine Charlie said 65 years ago, but that would be a hard sell since a strong American auto industry, which presumably means a strong GM, Ford and Chrysler, is the many-times tweeted purpose of the policy.
Why does GM make, on the face of it, the peculiar case that a 25-per cent tariff on its principal product would be a bad idea? Maybe that would make sense for olden-days industries that did all their production in one country. But the health of its U.S. operations, GM says, depend on their ability to compete aggressively against worldwide rivals, which in turn depend on “our complex and highly-integrated global supply chain, and our ability to design, engineer, and manufacture at scale on a global level.”
Start a trade war — throw big tariff wrenches into that complex global supply chain — and the result could be “a smaller GM, a reduced presence at home and abroad for this ionic American company, and … less — not more — U.S. jobs” (which I assume means “fewer” American jobs).
Moreover, many of the domestic jobs GM does support are not just stations on the assembly line but good, high-paid jobs in “technology innovation, research and development, design, product development, engineering, testing, information technology, purchasing and supply chain, finance, planning, customer service, corporate development and sales and marketing work.” Reduce GM’s worldwide output with tariffs and, even if you do manage to increase U.S. output, there will be less overall support for such jobs.
Ultimately, either consumers or shareholders will have to pay the higher costs tariffs will impose. GM casts the possibility consumers will pay in the self-exonerating passive voice, thus: “if cost is passed on to the consumer via high vehicle prices.” The more popular option of not raising prices but swallowing cost increases, GM puts in the active voice, “if we opt to bear the burden of tariffs or plant moves.”
But either route is bad. If consumers have to pay more, they will buy fewer cars, which hits U.S. car jobs directly. If GM has to pay more, that reduces its ability to invest, both in the U.S. and elsewhere, and that would be bad for jobs, too.
GM does leave open the possibility that it would support tariffs “tailored to specifically advance the objectives of the economic and national security goals of the United States.” The political necessity of not saying No, period, to an administration hyper-sensitively averse to that N-word is understandable. But even surgically precise interference with a complex economic organism can have undesirable side effects.
I suppose the administration’s response to GM’s brief would be that conceiving, designing, financing and marketing cars is not as important for nationalsecurity purposes as actually making them. But it’s not as if North Korea is a key link in GM’s supply chain. Unless the U.S.’s next war is against Europe, Canada or Mexico — which until recently didn’t seem even remotely possible — sourcing cars and car parts from these countries, even in wartime, would not risk U.S. security. We’ve all been on the U.S. side before (well, not Germany, Japan and Italy). We’re all but certain to be again (even Germany, Japan and Italy) if only the president would stop trash-tweeting his country’s best friends.
IF CONSUMERS HAVE TO PAY MORE, THEY WILL BUY FEWER CARS, WHICH HITS U.S. CAR JOBS DIRECTLY. IF GM HAS TO PAY MORE, THAT REDUCES ITS ABILITY TO INVEST.