Automaker tries to stay competitive amid change
President Donald Trump believes he can command markets like King Canute thought he could the tides. But General Motors has again exposed the inability of any politician to arrest the changes in technology and consumer tastes roiling the auto industry.
GM said it plans to eliminate 15 percent of its salaried workforce in North America and stop production at five plants that employ 6,700 workers, including one in storied Lordstown, Ohio. "We are taking these actions now while the company and the economy are strong to stay in front of a fast-changing market," CEO Mary Barra said.
The U.S. automaker plans to redeploy some $4.5 billion in annual savings to more profitable truck, electric-car and autonomous-vehicle manufacturing. Investors cheered by bidding up GM's stock, but the president reacted like a spurned suitor. "You know, the United States saved General Motors and for her to take that company out of Ohio is not good," he said Monday, adding Tuesday that he might end GM's subsidies. GM shares promptly fell 2.6 percent.
As a candidate, Trump lambasted Ford for shifting production to Mexico, then took credit when the company announced it would keep its Lincoln MKC in Louisville, Ky. But both decisions were motivated by market changes, and so is GM's.
GM is halting production at plants that make sedans including the Chevy Cruze, Impala and Volt hybrid. Americans are buying more trucks and SUVs amid lower gas prices and better fuel efficiency. Small cars make up a third of U.S. vehicle sales, compared with half in 2012.
About 75 percent of GM sales last year were trucks and crossovers, up from 60 percent in 2012. Its share of the small-car market has also fallen by a third in a decade amid Japanese and Korean competition.
The main driver of GM's failure a decade ago was its uncompetitive labor contracts. Rather than reduce costs or idle unproductive plants, GM offered bigger discounts to goose sales. But the market tides still rolled in, and GM executives have learned that staying competitive is necessary to avoid another collapse.
GM is essentially following Ford and Fiat Chrysler by phasing out small-car production. Last year GM cut production by a third at Lordstown and nearly half at a plant in Oshawa, Ontario. Keeping these factories open at lower levels of output would waste human and physical capital that could be deployed to more productive and profitable units.
Trump thinks his trade machinations can overrule the realities of the marketplace, but he's as wrong as Barack Obama was about the climate and regulation. Fine with us if he wants to end subsidies for all car companies. But if he intervenes to make GM less competitive, Trump will merely hurt more workers.
FROM AN EDITORIAL IN THE WALL STREET JOURNAL