At least it’s not North Korea. Donald Trump picked a fight with another American corporate powerhouse on Twitter this morning, this time taking aim at General Motors’ outsourcing of its Chevy Cruze manufacturing to Mexico. Trump accused GM of building some of its compacts south of the border and costing American jobs:
General Motors is sending Mexican made model of Chevy Cruze to U.S. car dealers-tax free across border. Make in U.S.A.or pay big border tax!
— Donald J. Trump (@realDonaldTrump) January 3, 2017
GM responded almost immediately, but not particularly well. CNBC missed the nuance:
General Motors responded to Donald Trump’s Tuesday morning attack on the automaker, saying it makes most of its Chevy Cruze models in the United States and sells only a “small number” of one model made in Mexico in the U.S.
“General Motors manufacturers the Chevrolet Cruze sedan in Lordstown, Ohio. All Chevrolet Cruze sedans sold in the U.S. are built in GM’s assembly plant in Lordstown, Ohio. GM builds the Chevrolet Cruze hatchback for global markets in Mexico, with a small number sold in the U.S,” the company said in a statement.
Er … that’s pretty much what Trump tweeted, was it not? He didn’t say all Cruzes sold in the US were made in Mexico, but 4500 of them crossing back across the border — as CNBC noted later in its written report — seems like a large enough number for comment.
What about that plant in Ohio? Two months ago, the Lordstown plant announced layoffs for the Cruze line that furloughed 1250 workers, an announcement that got buried in the post-election news (via Joseph Miranda):
Shifting demand from cars to trucks and SUVS is forcing General Motors to lay off more than 2,000 workers indefinitely at two assembly plants in Ohio and Michigan starting in January.
The company said Wednesday it will suspend the third shifts at factories in Lordstown, Ohio, and in Lansing, Michigan, because of the market change, which is growing and shows no sign of abating.
About 1,250 workers will be furloughed at the Lordstown plant, which makes the Chevrolet Cruze compact car, starting Jan. 23. Another 840 will be idled at the Lansing Grand River factory, which makes the Chevrolet Camaro muscle car and the Cadillac ATS and CTS luxury cars, when their shifts end Jan. 16.
“It’s supply and demand, and right now the demand is not there for what we have,” said Glenn Johnson, president of a United Auto Workers union local at the Lordstown plant east of Cleveland.
It’s mainly supply and demand, but GM is certainly taking a certain amount of advantage of cheaper labor in Mexico rather than keep some of those furloughed workers on the line in Lordstown. Those cars are being sold in the US. It might be a nitpicky point to some, but probably not to the auto workers on the lines in Lordstown — and those who are no longer on them.
That’s not to say that this is the best approach to dealing with the issue of manufacturing jobs going outside the US. The proper role of government — or governments-in-waiting — is to regulate without favor across entire markets in accordance with the law. If the law is inadequate to the market environment, then that should be changed in Congress and applied equally to all participants, rather than bully one participant at a time for exercising legal options for the best outcomes of its stockholders. If trade agreements are the problem, then change those rather than go from company to company in an attempt to shame them into acting outside of their best interests.
All that aside, Trump was correct to note that GM is building cars in Mexico for sale in the US. GM’s response is misleading at best, and arguably dishonest in citing Lordstown without noting the layoffs it just conducted there.
Addendum: Apart from that, GM has good reason to outsource its manufacture of cars for international sales. Mexico has more free-trade agreements than the US does, and GM saves a fortune by selling from Mexico as a result. If the incoming Trump administration wants to fix that, then they’ll need to widen free trade rather than constrict it.