The big news this week is General Motors’ decision to cull its lineup, closing plants and sacking about 15 percent of its North American workforce in the process. According to Chief Executive Officer Mary Barra, GM’s official reasons for doing so are all part of its grand plan to transition to a company focused on electric vehicles and self-driving cars.
While we harbor a vague suspicion that the automaker is actually trying to prepare itself for an incoming economic downturn, leaving itself with plenty of financial wiggle room, GM currently enjoys relatively healthy profits (thank you, truck sales) and a lofty share price. In fact, GM shares rose nearly 5 percent after it announced the shuttering of several plants in the U.S. and Canada, cutting as many as 14,800 jobs.
Unfortunately, GM’s investors seem to be the only group that’s pleased with the decision. Everyone else appears to be absolutely furious.
President Donald Trump, who campaigned on the promise of keeping jobs in America, said he had spoken to Barra via phone ahead of GM’s Monday announcement. During their discussion, Trump said he expressed his displeasure with the decision, noting that General Motors owes the United States for saving it during the Great Recession, and urged her to open up another plant in the Midwest to mitigate job losses in the region.
However, he sounded less cordial in a later interview with The Wall Street Journal. “They better damn well open a new plant there very quickly,” Trump said. “I told them, ‘You’re playing around with the wrong person.’”
Trump was far from alone in his condemnation of General Motors. According to Bloomberg, members from both parties criticized the company’s plan to cut its workforce, citing government aid the company has received over the last decade — everything from the 2009 federal bailout of the auto industry to the $1.5 trillion tax cut that went into effect in late 2017.
“The company reaped a massive tax break from last year’s GOP tax bill and failed to invest that money in American jobs,” Democratic Senator Sherrod Brown tweeted, describing GM’s move “corporate greed at its worst.”
Arno Hill, mayor of Lordstown, Ohio (where GM intends to stop production of the Chevrolet Cruze next year), said the mood in the small town was less than chipper. “I will say I’m not the happiest guy in town,” Hill said in a phone interview with Bloomberg. He added he was hopeful that General Motors would eventually use the facility to assemble a new product. “They said they were ceasing production, not shuttering.”
Jim Graham, the former president of the United Automobile Workers local that covers employees at the Lordstown plant, called the announcement “depressing.” Meanwhile, Representative Tim Ryan, a Democrat whose district includes Lordstown, said he would pursue congressional hearings over how GM spent billions of dollars in tax cuts.
“The American people deserve to know if the tax cuts they paid for are being used to inflate corporate profits at the expense of their economic security and the survival of American workers,” Ryan wrote in a letter to leaders of the House Ways and Means Committee.
Some who supported those cuts have even turned on the automaker. Senator Rob Portman, a Republican from Ohio who endorsed corporate tax cuts last year as a senior member of the Senate Finance Committee, said he was “deeply frustrated with General Motors’ decision.”
However, not everyone is ready to bite the head off of the company. Steve Rattner, head of former President Barack Obama’s auto task force (which facilitated the GM and Chrysler bailouts), said the automaker’s announcement shouldn’t be confused as violation of the bailout agreement. From his point of view, the industry has changed immensely since 2009 and companies need to be able to evolve and adapt.
“No, I don’t think these violate the 2009 agreement, in part because we always made clear that GM should be free to run its business in the ordinary course,” Rattner said. “It’s important for GM to be free to adjust its business accordingly.”
Officially, that’s exactly what General Motors is doing. Its autonomous and electric vehicle development programs have been costly. But its new revenue streams, many of which are heavily dependent upon connectivity and new tech, haven’t had sufficient time to make up the difference — assuming they will. In the interim, the company’s restructuring aims to save about $6 billion.
“The actions we are taking today continue our transformation to be highly agile, resilient and profitable, while giving us the flexibility to invest in the future,” GM’s Barra explained.
Is it sketchy? Maybe a little, but corporations are rarely worried about anything other than their bottom line. General Motors can’t offer anyone a job if it folds. However, the issue that has everyone’s feathers so ruffled seems to stem from the manufacturer not yet being in dire straits. Of course, even though the left and right seem to be largely in agreement on this, it hasn’t stopped like-minded individuals from participating in political feuds.
Not One Penny, a progressive campaign launched specifically to oppose any Republican plan that serves to approve tax cuts on corporations or the very wealthy, has estimated GM saved at least $500 million last December. “General Motors’ decision to gut its workforce epitomizes the bad corporate behavior Republicans in Congress have incentivized for generations,” said spokesman Ryan Thomas. “Instead of using its massive tax savings to increase employee wages or invest in its workforce, GM is shuttering plants and cutting jobs to increase profits and further enrich shareholders.”
[Image: General Motors]