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Trump threatens to cut off GM subsidies over job cuts

28 November 2018
Trump threatens to cut off GM subsidies over job cuts

GM Chief Executive Officer Mary Barra is trying to make the company leaner as USA auto demand slides from a record in 2016 and sales in China - GM's other profit center - are also in a slump.

Four factories in the USA and one in Oshawa, Ont. could be shuttered by the end of 2019 if the automaker and its unions don't come up with an agreement to allocate more work to those facilities, GM said in a statement Monday.

Even as Tuesday's briefing was taking place, Trump tweeted an ominous threat to withdraw all General Motors subsidies in retaliation for the cuts.

Workers of Oshawa's General Motors vehicle assembly plant, listen to Jerry Dias, president of UNIFOR, the union representing the workers, at the union headquarters in Oshawa, Ont. on Monday, Nov. 26, 2018. General Motors announced Monday that it plans to lay off roughly 14,700 workers, a number which represents 15 percent of all its salaried employees.

Cadillacs, while not entirely popular in the United States, are among GM's biggest sellers worldwide, particularly in China.

General Motors announced Monday that Lordstown, along with several other plants of operation, will remain "unallocated" meaning they won't receive any new product.

"There's disappointment that it seems that GM would rather build its electric cars in China than the United States, and we are going to be looking at certain subsidies regarding electric cars and others, whether they should apply or not". GM stock declined by over three percent after Mr. Trump's tweet was posted.

Truck and SUV plants, on the other hand, operate almost around the clock on three shifts and are at 105 percent of capacity.

Trump's threats come 16 months after Trump visited OH, a state he won in the 2016 election by more than 8 percentage points, and promised residents that their jobs are "all coming back".

"We recognise the need to stay in front of changing market conditions and customer preferences to position our company for long-term success", Barra said. It's expected to reach that point by the end of this year. GM complains that Trump's tariffs on steel and aluminum have cut into the company's profits this year.

GM said it will take pre-tax charges of $3bn to $3.8bn to pay for the cutbacks, but expects the actions to improve annual free cash flow by $6bn by the end of 2020.

The GM CEO met with Kudlow at the White House on Monday shortly after announcing plans to shutter five factories in the USA and Canada and lay off about 14,000 employees.

Ohio's incoming governor and lieutenent governor, Mike DeWine and Jon Husted, said they would visit GM in person to make the case for saving the Lordstown plant. They say the Chevy cruise is not selling well. The company said it will also close two unidentified factories outside North America. Also on the line are transmission factories in Warren, Michigan, as well as Baltimore.