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Don't Just Blame Trump for GM's Layoffs—Blame GM – POLITICO

by Oct 29, 2022Blog0 comments

Patrick Cavan Brown for Politico Magazine
The auto industry shaped and sustained the retrograde world which it now finds itself having to navigate out of—and U.S. consumers went along for the ride.

Jamie Lincoln Kitman, a lawyer, is New York bureau chief for Automobile Magazine.
As Donald Trump entered office, General Motors had a choice.
It could have publicly supported the rules it had agreed to in negotiations with the Obama administration and California, and continued on the righteous path toward more efficient cars, hybrids and electrification, with a profit cushion provided by Obama’s surprising willingness to craft regulations that allowed the industry’s main profit engine—SUVs—to go forward while offering federal electric-car tax credits which would help drive demand. Or it could wind the clock back as far as the Trump administration would let it.
Though there are competing impulses within the company, this week’s surprise announcement that GM, despite earning profits, would lay off 15 percent of its salaried workers and shutter five North American plants very clearly lines up with the latter imperative. It helps move GM, like Ford and Fiat Chrysler, to an all-SUV model lineup, as the company marches steadily away from ordinary passenger cars—the coupes, sedans, station wagons and minivans of yore—in favor of cars and trucks that are necessarily heavier and higher, thus less aerodynamic, with a corresponding loss in fuel efficiency.
If GM is indeed looking far into the future, it’s doing so by first clinging to the past. And in the process, it has angered a president who gave the company its first dream (lower taxes) and then more than it had ever bargained for: the upending of Obama-era fuel economy rules for the years ahead, while stalling, crippling and generally fighting the Environmental Protection Agency and California initiatives aimed at better policing automotive emissions.
Earlier this week, three main schools of thought emerged to explain why GM was taking this course of action.
What we might call the “greedy bastards” theory came first, centered as it is upon the idea that at a time of strong, SUV-fueled revenue and high profits, The General for some selfish reason thought more money for its shareholders—made possible by ruthless cost-cutting—would be a good idea. Alongside trade unionists, inveterate GM haters and many liberals including Sen. Bernie Sanders, we find a prominent, if unlikely, subscriber to this theory in President Donald Trump, who quickly threatened to punish the company for its actions—bizarrely proposing to cut tax subsidies for purchases of electric vehicles.
Yet a second theory blames the president himself, for inchoate, but inevitably ham-handed tariffs on the transnational automobile industry. Tariffs on steel are believed to have already cost GM $700 million in higher prices from its mostly American suppliers, and lord knows what the future holds.
A third theory pats GM on the back for looking far down the road and grabbing bigger profits now, whether for purposes of pure wealth creation or—viewed more nobly by some—to better lard its kitty for the big, bad, electric, autonomous, car-sharing future, a bumpy transition seen as inevitable, imminent and sure to separate the men of industry from its boys. As the headline of a Chicago Tribune editorial had it on Tuesday, “What’s Good for GM and its Employees, is Steady Profits.” To which they might have added, “having a job is nice, too.”
But the whole truth isn’t quite as simple or clear-cut as blaming Trump or greedy shareholders.
Like many legacy manufacturers, GM’s shares have languished despite years of substantial profit, including those permitted when a court-ordered 2009 bankruptcy reorganization allowed it to dump tens of billions in liabilities to workers’ and retirees’ pensions and health plans. Yet despite this—and notwithstanding substantial investments in ride-sharing, autonomy and electric powertrains, the last of which can be seen (but not heard) today in products like the Chevy Bolt, a silent, all-electric compact with a class-leading 265-mile range—GM share prices remain depressed.
And speaking of depressed, consider GM’s executives. They’re jealous of the glamorous, generously compensated world of tech with which their smokestack industry is often compared and with whose executive ranks they more and more frequently cross paths. They’re bewildered by electric carmaker Tesla and its huge market capitalization despite its near-complete lack of profit. They’re bitter and painfully conscious that their achievements haven’t been recognized. So they fall over themselves showing the market that they’re tough, ready for the future, that their rose-colored glasses have been removed, giving them a clear view of the foreboding freeway ahead. Meanwhile, they make money hand over fist selling SUVs while canceling low-profit car models and laying off line workers and midlevel managers.
GM executives surely hoped to move the needle on their stock this week by showing how swiftly they could cut costs. And indeed, the company’s shares initially rose 5 percent following its bombshell announcement. But the gains were substantially lost within hours, following a storm of Trumpian hate-tweets launched in the company’s general direction.
As the president’s pique became evident, the automaker was down on its knees, kissing the ring and releasing a statement affirming its “commitment to U.S. manufacturing,” that said in part: “We appreciate the actions this administration has taken on behalf of industry to improve the overall competitiveness of U.S. manufacturing.”
Some analysts have offered that GM is simply making as much money as it can the old-fashioned way, piling up the cash it will need to transform. And still others observe that the auto industry is cyclical: After many good years coming back from the recession, a crash is overdue, and, this line of reasoning goes, so is a cash cushion. Which is fair enough, but not the end of the story.
The auto industry, GM included, act like this shift in consumer preference is complete. It isn’t; more than half of people only quite recently didn’t buy SUVs. They also act like it happened in a vacuum, that they are merely listening to the consumer when choosing what to sell and which plants to close.
The only thing is, consumers also listen to the industry. If they didn’t, then all the trillions of dollars spent throughout history marketing automobiles has been wasted, including all of that marketing that has, for decades, been increasingly aimed at selling people SUVs they don’t need.
Make no mistake, the public is culpable, too; many of us go for the big stuff. But the situation owes to a paradigm the industry created itself: The bigger it is, the more it costs; the higher it rides, the higher the price, meaning the bigger the profit. The industry and the stock market have decided that full-fat, high-unit profit is the only way forward.
It didn’t have to be this way. But it was, just the way longer cars once cost more than shorter ones, in spite of the comparatively small price differential associated with building them. The pricing was a con and it remains one, because it’s an easy principle to sell. The public, who are neither innocents nor too bright, buy into this grift every time they see it.
Yet even if GM is husbanding its wealth to get strong to face an unknown and terrifying future, the company must recognize that by easing off the metaphorical throttle in its commitment to cleaner, more fuel-efficient cars (canceling its hybrid Volt and economical Cruze, for instance, or barely marketing the all-electric Bolt since its launch last year) and failing to utilize its bully pulpit against a president who doesn’t accept the reality of climate change (which GM has long since acknowledged is real), it has delayed the day when it and we might get to that greener, cleaner future it claims to be chasing.
In sad fact, it has instead openly lobbied to help allow itself to fall back into its old habit of making money by persuading people to buy bigger and thirstier cars than they need, rendering GM and its customers ever more vulnerable to rising gas prices and shortages.
The public may well have gotten what we deserve, the way many of us get more sugar than we need because we “asked” for it. But no discussion of the automobile market is complete that omits the industry’s role in shaping and sustaining the retrograde world which it now finds itself having to navigate out of.
The auto manufacturers can blame everyone and everything for where they are, but most especially, they can blame themselves.
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