Politicians Are Real Mad at GM for Slashing Jobs After Last Year's Massive Tax Cut

Illustration for article titled Politicians Are Real Mad at GM for Slashing Jobs After Last Year's Massive Tax Cut
Photo: GM
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Politicians are Mad at General Motors, investors are Happy with General Motors, Carlos Ghosn’s arrest blindsided the French and more await you in The Morning Shift for Tuesday, Nov. 27, 2018.

1st Gear: Oh Hey, Remember That Bailout? And the Tax Cut?

Man, remember when General Motors got a massive federal bailout after declaring Chapter 11? And then there was that huge tax break from last year’s GOP tax bill, where did that money go?


Apparently not toward American jobs, as the company announced that it would close several factories in Ohio and Michigan (and Canada, which is not America) and cut some 15,000 jobs yesterday.

People are pissed. Politicians especially.

Both Democratic and Republican politicians are Mad, according to Bloomberg. Ohio Democratic Senator Sherrod Brown, tweeted that though GM had “reaped a massive tax break” last year, it still “failed to invest that money in American jobs.” He called the decision “corporate greed at its worst.”

Democratic Representative Tim Ryan, whose district includes the Lordstown plant, wants congressional hearings on how GM spent the tax cut money.

From the story:

“The American people deserve to know if the tax cuts they paid for are being used to inflate corporate profits at the expense of their economic security and the survival of American workers,” Ryan wrote in a letter to leaders of the House Ways and Means Committee. He urged them “to investigate the outcome of this corporate tax handout.”


And Ohio Republican Senator Rob Portman (who, as Bloomberg points out, helped GM receive those corporate tax cuts last year), said, “I am deeply frustrated with General Motors’ decision.”

Democratic Representative Joe Kennedy III tweeted:


And finally, a progressive organization called Not One Penny estimated that GM saved over $500 million from the tax cuts. Its spokesman Ryan Thomas said,

“General Motors’ decision to gut its workforce epitomizes the bad corporate behavior Republicans in Congress have incentivized for generations. Instead of using its massive tax savings to increase employee wages or invest in its workforce, GM is shuttering plants and cutting jobs to increase profits and further enrich shareholders.”


Of course, Michigan and Ohio are the two states that swung for Trump during the 2016 presidential election. During his rallies, he promised to “stand up” for American workers and bring jobs back from overseas. Let’s recap what the president said in 2017:

Trump talked of viewing shuttered factories from his motorcade – “big, once incredible job-producing factories” – with First Lady Melania asking what had happened to the now-rusting relics that once formed the heart of Ohio’s steel industry.

“I said, those jobs have left Ohio. They’re all coming back. They’re all coming back. Don’t move, don’t sell your house,” the president told the cheering audience.


So much for that! Naturally, the president is steaming mad at GM CEO Mary Barra, as recapped by the Wall Street Journal here:

On Monday, Mr. Trump said he told Ms. Barra that she should stop making cars in China and open a new plant in Ohio to replace the one that is ending production.

“They better damn well open a new plant there very quickly,” Mr. Trump said in an interview with The Wall Street Journal on Monday, noting that he talked to Ms. Barra Sunday night.

“I love Ohio,” Mr. Trump said. ‘I told them, ‘You’re playing around with the wrong person.’”


Trumbull County, where the Lordstown factory is, gave Trump 51 percent of the vote after 60 percent voted for Barack Obama in 2012.

It’s a lot of yelling, but it looks like GM’s mind is made up.

2nd Gear: It’s Just Business

While GM’s cost-cutting and restructuring decisions have employees and elected officials pissed, investors and analysts seem pretty delighted about it.


When news of its new direction broke yesterday, shares went up 4.8 percent. Apparently, people are pleased with this “new GM” way of dealing with problems.

Maryann Keller, an independent auto analyst and who has written extensively about GM, believes this is all part of the nature of business, according to Bloomberg. She said:

“In the past, GM management didn’t react as quickly — they went through a sort of slow-speed crash that culminated in 2009 bankruptcy, and that’s a lesson that was hard-learned. This is a cyclical, highly competitive, slow-growing business. You can’t continue producing unprofitable vehicles, especially when you’re making crazy investments in mobility service business with no potential for profit in the foreseeable future.”


Indeed, when you consider the market, what GM is doing isn’t that different from what Ford did, which is shift its production lines to SUVs, electric cars and autonomy and cut costs because nobody is buying small sedans anymore. It’s a radical move, but one that could save it from a repeat of 2009, which was financial crisis and bankruptcy.

Anyway, sucks that workers lose their jobs as the investor class rises, but that’s the game!


3rd Gear: Let’s Give Socialism A Try, Eh?

And now, something you’d never see in America: why not just nationalize GM?

“It’s time,” rumbles David Olive in Toronto’s The Star in response to news that GM would shut its Oshawa assembly plant in Ontario, “to give serious thought to creating the country’s first Canadian-owned automaker.”


He goes on to point out that Canada’s been building cars longer than Toyota and houses independent and innovative auto-parts giants. These companies serve people around the world, while Ford, FCA, GM, Toyota and Honda mostly provide for the U.S. market.

Olive’s solution? Canada buys GM Canada. Per his editorial:

By purchasing GM Canada in its entirety, Canada would own a major, vertically integrated automaker. GM Canada operates assembly and parts plants, engineering labs, distribution centres, a nationwide dealership network and a cold-weather testing centre in Kapuskasing.

A rechristened GM Canada would design vehicles for Canadians. And, learning from that, it would devise winning vehicles for niche markets worldwide, becoming a geographically diverse firm. It would export to both major and emerging economies. The latter are the world’s fastest-growing markets, where “Canada” has high and favourable brand recognition.

And an independent Canadian automaker would no longer be yoked with production of marginal GM products, which has repeatedly been GM Oshawa’s fate.


It’s true that Canada doesn’t have its own an automaker of its own, despite building everyone else’s cars. Olive believes that a Canadian automaker wouldn’t screw over Canadians like a shitty American one just did. He concludes,

According to the old expression, one either acts or is acted upon. We have allowed GM to act upon us in disagreeable ways long enough.

There are other examples of injurious branch-plant impact on Canada. But for now, let’s make an example of GM. And we’ll see how it goes from there.


You can read the rest of the fire here.

4th Gear: ‘It’s Complicated’

Back to Nissan-Renault! We also shouldn’t forget Carlos Ghosn after all the action-packed GM news from yesterday. If you woke up very surprised to the news of his arrest after accusations of allegedly under-reported his income and also using company funds for personal reasons, you were not alone.


The arrest apparently blindsided the French, according to Automotive News Europe. From the story:

Ghosn’s arrest appears to have come as a surprise to Renault and the French government, Renault’s largest shareholder. In the past week, both have gone into damage-control mode, with the government expressing its support for the Renault-Nissan-Mitsubishi alliance, and Renault appointing a co-CEO to assume Ghosn’s duties and beginning an internal audit to examine Ghosn compensation.

Notably, however, neither the government nor Renault officials have offered a personal defense of Ghosn. Bruno Le Maire, the finance minister, said that Ghosn was not in a position to continue leading the Renault, and he has repeatedly expressed the hope that the Renault-Nissan-Mitsubishi-alliance — which he described as “indispensable” on Sunday — be preserved.


Of course, conspiracy theories are also flying around, which are always fun to think about. One alleges that Nissan CEO Hiroto Saikawa appararently felt that Ghosn had “amassed too much power” and wanted to change up the alliance more favorably toward Nissan.

That would explain why Saikawa told reports that the arrest was not a “coup d’etat” during his press conference and how there isn’t much information about the charges against Ghosn.


Anyway, a very major CEO/chairman of a massive car company just got arrested! It’s crazy! Of course things are going to be complicated for a while. We’ll see more details as this shakes out.

5th Gear: Meanwhile at FCA

While everyone else is screaming at/about GM and the Renault-Nissan-Mitsubishi Alliance, Fiat Chrysler is trying to improve its margins by maybe building more cars in Italy.


Unnamed union sources said that FCA will build “a raft” of new cars in Italy, which could include Jeeps and some kind of Alfa Romeo SUV, according to Reuters. The plans are part of the strategy that Sergio Marchionne outlined before he died. From the story:

In his last strategy unveiled in June, Marchionne vowed to keep converting Italian plants to churn out Alfa Romeos, Jeeps and Maseratis instead of less profitable mass-market vehicles in an attempt to preserve jobs and boost margins.


The Melfi plant in southern Italy is expected to build the Jeep Compass and already builds the Jeep Renegade. The Compass will be the Fiat Punto’s replacement. The Pomigliano factory could keep building the Fiat Panda and might also get the new “Baby Jeep,” which would slot under the Renegade for the European market. The Mirafiori plant in Turin might start making the electric Fiat 500, though those plans aren’t final yet.

And Maserati’s upcoming Alfieri will probably be built in Modena, where the brand is based.


Fine, all fine. Carry on, FCA.

Reverse: Dancing With a Champ


Neutral: Is GM the Bad Guy Here?

Or are these cuts and factory-closings just business?

Writer at Jalopnik and consumer of many noodles.

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Silas Von Dookiebird

1st Gear: It’s called trickle down economics. It won’t happen immediately. It’s not gush down. It can take years, Years! In fact, I’m still waiting for Reagan’s tax cuts to trickle down to me. But it’s coming. It has to be coming. Republicans have been telling me for years that cutting taxes on the rich and corporations will benefit me personally. They wouldn’t lie would they? The trickle-down economic model has been proved to be..... well I’m still waiting.

Nothing to be done. Dance misery, dance.