President Donald Trump reacted with outrage when General Motors announced a broad restructuring on November 26 that would eliminate six sedan lines, affect some 14,000 GM workers, and shutter four plants — including the giant Lordstown facility in the key swing state of Ohio.
“I was very tough,” intoned the president. “I spoke to [GM CEO Mary Barra] when I heard they were closing and I said, ‘This country has done a lot for General Motors, you better get back in there soon. That’s Ohio and you better get back in there soon.’”
Trump was echoed by the usual chorus of Midwest Democrats singing from the status quo United Auto Workers songbook. They’re on the wrong side of history, but he doesn’t have to be: His pro-growth agenda could help make GM great again.
GM’s plant closures are not because of greed, tariffs, incompetence, or any of the other usual explanations proffered by unions and their Democratic allies. They mark a fundamental restructuring of the company, a necessary effort to keep up amid the auto industry’s historic shift toward autonomous and electric vehicles. The digital revolution has transformed industry after industry — telephone, retail, entertainment — and now it’s coming to car manufacturers.
Every global automaker is pouring billions into a coming future where app-enabled, autonomous cars will transport passengers and goods to their destinations 24/7. Manufacturers expect that those vehicles will be battery-powered for two reasons: because central, electric recharging makes sense for autonomous fleets, and because it dovetails with government mandates to eliminate the gasoline engine.
Among American automakers, GM has been the most aggressive in transforming its business model to compete against formidable, Silicon Valley–based autonomous players such as Uber and Google’s Waymo. (Expect Ford to make a similar, aggressive restructuring soon.) GM is focusing on its profit-making truck/SUV core while sinking $1 billion into San Francisco–based Cruise Automation as it targets 2019 for the unveiling of a self-driving service. In conjunction with its restructuring, GM named its president, Dan Ammann, the new CEO of Cruise. The General is moving fast.
Automakers see massive growth potential in autonomous car-subscriber services. These services are likely to be structured the way the cellphone industry is today, with the big money made from the subscription rather than the hardware.
This monumental shift in the automotive industry is likely to happen with or without Trump’s blessing. Instead of railing against GM’s effort, he should offer his support, which would make the transition easier for this iconic American industry and its workforce.
The businessman-turned-politician should recognize GM’s bold, high-risk move in the face of daunting odds: reimagining a century-old automaker as a tech titan. CEO Barra is on Capitol Hill this week smoothing lawmaker feathers and explaining the fast-changing auto-industry landscape.
But after repeated promises to revitalize Midwest manufacturing, Trump is threatening to tie GM’s hands rather than free them. He’s insisting that the General keep producing unprofitable makes (the Chevy Volt and Cruze sedans) and move efficient Mexican plants back to the U.S.
That rhetoric echoes old-line Rust Belt Democrats such as Debbie Dingell, who said Monday that “I’m not giving my support to a company that keeps sending jobs to Mexico and not here. We have had enough of that.”
Detroit needs Trump’s carrots, not his sticks – in particular, more tax reform like the 40 percent corporate cut, which has freed up $150 million in cash for GM to invest. More deregulation would also help — reforms that have the American auto market on track for an unprecedented fourth straight year of over 17 million cars sold domestically.
The Trump administration’s continued rollback of Obama mpg rules that forced unpopular electric vehicles on automakers could also help free up capital. Look no further than the Volt, the plug-in vehicle that Barack Obama famously touted during the GM bailout: It has flatlined in sales and been axed in GM’s restructuring. Why is Trump lamenting its demise?
Veteran auto analyst Joe Phillippi of Auto Trends Consulting says electric-vehicle regulations are here to stay, given the enthusiasm of left-wing politicians worldwide for onerous regulations designed to stop climate change.
“Today, automakers have to spend billions for parallel gas and EV drivetrains,” Phillippi says. “Try as you might, you can’t change that.”
GM says autonomous and electric vehicles go together like peanut butter and jelly. Maybe. But dialing back federal mandates will make the market the arbiter of that decision, rather than the government.
Unmentioned in the anti-GM rhetoric employed by Trump and Democrats is the fact that, despite a downturn in its own sedan sales, Honda has managed to keep its huge Ohio operations humming with no threat of a shutdown. That’s in no small part because non-union Honda has more flexible manufacturing facilities than UAW-collared GM.
“Entering a U.S. auto plant is like going through a time warp,” Phillippi says. “They operate under old-school labor agreements. Union reps are everywhere, whereas, in Honda’s plants, if you want to move around jobs to adapt to market conditions, you just do it.”
Voted into office by Midwest labor, Trump may not have the guts to shake up established union ways. But in the spirit of draining the swamp, he must recognize and applaud GM’s efforts to retool for the future.
Tomorrow’s working-class jobs depend on it.