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Trump threatens to cut GM subsidies in retaliation for U.S. job cuts

Stock Markets Nov 27, 2018 09:42PM ET
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© Reuters. FILE PHOTO: A 2012 Chevrolet Volt electric vehicle is parked at the solar-powered electric charging station designed by Sunlogics in the parking lot of General Motors Co's assembly plant in Hamtramck
 
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By David Shepardson

WASHINGTON (Reuters) - U.S. President Donald Trump threatened on Tuesday to eliminate subsidies for General Motors Co (NYSE:GM) in retaliation for the automaker cutting U.S. jobs and plants, and the automaker also took fire from Canadian political and labor leaders for cutbacks there.

"The U.S. saved General Motors, and this is the THANKS we get! We are now looking at cutting all @GM subsidies, including ... for electric cars," Trump said on Twitter.

Trump did not explain what "subsidies" he was referring to.

GM electric vehicles are eligible for a $7,500 tax credit under federal law, but it is not clear how the administration could restrict those credits or if Trump had other subsidies in mind.

Trump's harsh words rattled investors, who bid down GM shares by 2.6 percent on Tuesday after sending them up on Monday in response to the automaker's cost-cutting.

Trump and Canadian Prime Minister Justin Trudeau "discussed their disappointment in the announced closures of General Motors plants in their respective countries" during a phone call on Tuesday, White House spokesman Hogan Gidley said.

The wrath of the leaders of the United States and Canada dramatized the challenges GM and its Detroit rivals will face as they restructure to cope with the most dramatic technology and market shifts in decades.

Trump has made boosting auto jobs a key priority during his almost two years in office and has often attacked automakers on Twitter for not doing enough to boost U.S. employment.

The Republican president on Tuesday escalated his attacks on GM's plan to cut 15,000 jobs and mothball five North American factories, including four in the United States. Among those four is a car factory in northeast Ohio, a state critical to victory in the 2020 presidential campaign.

GM said in a statement following Trump's comments that it was "committed to maintaining a strong manufacturing presence" in the United States after investing $22 billion in operations here since 2009 and will add new jobs in electrification and autonomous vehicles.

The cuts will "position the company for long-term success and maintain and grow American jobs," GM said, adding that many workers at impacted plants will be able to move to other GM factories.

GM Chief Executive Mary Barra spoke to Trump over the weekend to discuss the cuts and was at the White House on Monday to meet with economic adviser Larry Kudlow.

Kudlow told reporters on Tuesday that the administration had helped GM with fuel efficiency standards and other regulations.

"We’ve done this to help you and I think his disappointment is, it seems like that they kind of turned his back on him," Kudlow said.

It was not the first time that Trump made threats against a U.S. company. In June he threatened Harley Davidson with higher taxes after the motorcycle maker announced it would move some production overseas. Trump has also threatened to take action against Amazon.com Inc (NASDAQ:AMZN), saying repeatedly in April, without providing evidence, that the online retailer was not paying the U.S. Postal Service a fair rate and saying that he would look at policies to address what he said were Amazon's unfair business advantages.

Trump has not followed up on these threats.

WORKERS DISCUSSING "MASS ACTIONS"

Trump also criticized GM for not closing facilities in Mexico or China.

"General Motors made a big China bet years ago when they built plants there (and in Mexico) - don’t think that bet is going to pay off. I am here to protect America’s Workers!" Trump wrote on Twitter.

GM currently builds just one vehicle in China that it exports to the United States, the Buick Envision, and had sold about 22,000 through September. GM sold nearly 2.7 million vehicles in China through September, nearly all built in China.

White House spokesman Sarah Sanders told reporters on Tuesday that the president is looking at options.

"The president wants to see American companies build cars here in America not build them overseas and he is hopeful that GM will continue to do that here," she said.

GM has been lobbying Congress, along with Tesla (NASDAQ:TSLA) Inc, to lift the current cap on electric vehicles eligible for tax credits, but any action by Congress before 2019 is a long shot, congressional aides said.

Currently, once a manufacturer sells 200,000 electric vehicles, the tax credit phases out starting in the following quarter. GM has said it expects to hit the 200,000-vehicle threshold by the end of the year. Tesla hit the cap in July.

In Canada, workers returned to the assembly line at General Motors' Oshawa, Ontario, plant on Tuesday, as their union president met with Trudeau and said he was ready for "mass actions" at GM facilities. GM said on Monday that the Oshawa plant would close in December 2019. "We're dealing with a corporation that doesn't have any respect for Canadian and American workers, and I think we should treat them in the same vein," said Jerry Dias, national president of Unifor, which represents GM workers in Canada. Dias said he would meet with the United Auto Workers on Wednesday and discuss the possibility of "mass actions" in GM plants across the two countries.

Democrats are seizing on the plant closing and have repeatedly attacked Republicans in the past two days for giving large companies a tax cut.

Senate Democratic Leader Charles Schumer on Tuesday criticized Trump for "overpromising" as a candidate about protecting against plant closures if he was elected. “GM pocketed the tax break we gave them and are closing up shop anyway, with nary a word from the president until after the fact,” Schumer said.

GM declined to comment on Schumer’s remarks.

Trump threatens to cut GM subsidies in retaliation for U.S. job cuts
 

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Comments (3)
george surovik
george surovik Nov 27, 2018 6:19PM ET
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Ask Obama
John Miller
John Miller Nov 27, 2018 5:57PM ET
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so why r taxpayers subsidizing a company we've already been forced to bailout?
Alvin Tostig
Alvin Tostig Nov 27, 2018 3:22PM ET
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Trump doesn't understand how markets work. I remember him firing thousands at his casino when demand slowed at his properties. Maybe he forgot.
 
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