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General Motors Upheaval Rocks U.S. Economy

It is hard to get Republicans and Democrats to agree on anything, but General Motors CEO Mary Barra managed to bring the two parties together Monday afternoon when she announced massive layoffs and the closing of at least five GM plants.

This from Sherrod Brown (D-OH).

“The company reaped a massive tax break from last year’s GOP tax bill and failed to invest that money in American jobs. It’s corporate greed at its worst.”

This from President Trump.

“I stressed the fact that I am not happy with what she did. You know, the United States saved General Motors. For her to take that company out of Ohio is not good.”

Barra said that GM would close production plants in Michigan and Ohio, and in the Province of Ontario by Dec. 2019 as part of a restructuring plan to include permanently laying off 14,000 workers. Also set for closure are plants in Michigan and Maryland producing transmissions and transmission components.

The shutdowns are devastating for employees as they signal the loss of family wage jobs, but they also draw a bright line, highlighting the differences between promises the President made on the campaign trail and what is actually going on under his watch. Michigan and Ohio became red states for the President, helping seal his electoral college Presidency.

On Monday, Trump said he pressed Ms. Barra during a conference call, asking her to consider building some different vehicles at the plants. He didn’t get anywhere with her, but Barra met with White House adviser Larry Kudlow after the announcement.

 

Arno Hill is the mayor in Lordstown, Ohio. The folks there proudly build the Chevy Cruze. Hill described the mood in his town of about 3,000 people as “somber,” after the news broke.

What about the Tax Cuts GM Received?

Representative Tim Ryan’s (D-Ohio) district includes Lordstown. He called for Congress to initiate hearings on how General Motors spent billions worth of tax cuts.

Not One Penny is a grassroots group that opposed the tax cuts passed last year by the Republican Congress and eagerly signed by the President. They had this to say after GM’s announcement:

General Motors’ decision to gut its workforce epitomizes the bad corporate behavior Republicans in Congress have incentivized for generations. 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.”

For its part, General Motors points to restructuring plans by other car companies, including Ford, to meet the changing demands of the American driver. Indeed, companies such as General Motors who sell sedans and coupes are scrambling to find market share in the new economy that embraces pickups and crossovers, leaving low-profit cars to the rental car and ride-share companies. It is this very fact of life that caused Ford to scrap every car it makes (save the Mustang). Instead, stocking the F-150s that the company can’t keep on the lot.

Did GM Respond?

“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,” Barra said in a statement. Wall Street responded to the plant closures by raising the price of GM stock by four bucks a share.