The above-linked article is just one of many stories about Trump’s anger directed toward General Motors over its decision to end production at the Lordstown, OH assembly plant. He’s wasting his time. GM isn’t going to operate a plant building cars that aren’t selling. Why wasn’t the Chevy Cruze selling? It’s not that it isn’t a really nice small car. The problem is two-fold: the market has shifted away from cars to SUVs and, more importantly, the market is absolutely saturated with foreign brands.
I recently heard an automotive industry analyst sum up the situation this way: “GM has fourteen plants, but only needs twelve to meet demand.” (I may not be remembering those numbers exactly right.) More history was in order. He should have said that “GM once had dozens of plants and is now down to fourteen, thanks to imports, needs to shrink further to twelve and, if nothing is done, will eventually have none.” That’s a more thorough description of what the domestic auto industry has faced.
Trump needs to stop wasting his time chastising Mary Barra, GM’s CEO, and do the one thing that GM fears the most – impose a 25% tariff on all auto and parts imports. Soon GM would find itself in need of restarting production at Lordstown and, beyond that, begin building many more assembly and parts plants around the U.S.
Then why does GM fear such a move, one that would likely double its sales volume in the U.S.? Because China might retaliate by kicking U.S. automakers out of China, depriving them of access to that market. With 1.2 billion people, four times the population of the U.S., GM and other global corporations think China is a market with the potential to be four times the size of the U.S. It’s currently nowhere near that big and never will be, thanks to gross over-crowding in China, but GM doesn’t understand that just yet. So they’re willing to cede a large portion of the U.S. market (and with it, U.S. manufacturing jobs) to foreign competition in order to preserve their access to the Chinese market.
Trump has been threatening to pull the trigger on auto tariffs for some time now. What’s he waiting for? The “Make America Great Again” initiative will remain stalled and more auto plants will close as long as he fails to act.