Hey guys, remember when Prznint Trade Wars decided to tax imported steel to “save” American steel workers, and everyone warned him it would be a disaster because there are more workers in other steel-using industries downstream who would lose their jobs if steel prices went up?
Guess what? It was a disaster!
General Motors Co. will cut as many as 14,000 workers in North America and put five plants up for possible closure as it abandons many of its car models and restructures to cut costs and focus more on autonomous and electric vehicles, the automaker announced Monday.
So what’s happening?
The restructuring reflects changing North American auto markets, which have been shifting away from cars and toward SUVs and trucks. In October, almost 65% of new vehicles sold in the U.S. were trucks or SUVs. That figure was about 50% cars just five years ago. GM is shedding cars largely because it doesn’t make money on them, Citi analyst Itay Michaeli wrote in a note to investors. “We estimate sedans operate at a significant loss, hence the need for classic restructuring,” he wrote.
Oh, so with the added cost of steel taxes, the thin profit margins on sedans was lost. Got it. So what is Prznint Stupid doing about it?
“…I spoke with Mary Barra, the head of General Motors last night. I said: I heard you’re closing your plant. It’s not going to be closed for long, I hope, Mary, because if it is you’ve got a problem…. They better damn well open a new plant there very quickly. I love Ohio. I told them, ‘you’re playing around with the wrong person.’””
“Nice plant you got here, hate for anything to happen to it,” he didn’t add, stupidly. GM is closing the plant, you moron.
Politico tells us that Prznint Run-It-Like-A-Business offered Barra some FREE advice:
“They say the Chevy Cruze is not selling well,” he said. “I say, well, then get a car that is selling well and put it back in.”
Barra is getting rid of the ones that are not selling well, Comrade Stupid! The plant closures are for the sedans that are not selling well (the Cruze, the Volt, and the Impala), so that Wharton MBA—that ol’ Fred paid for—is really paying dividends, now innit?
Axios morning email thingie (idiosyncratic emboldening is theirs):
The big picture: All the top-selling sedans in America — the Toyota Camry, Honda Civic, Honda Accord, Toyota Corolla, Nissan Altima, and Nissan Sentra — are Japanese.
Why it matters: American carmakers can’t compete, and are giving up that segment of the market. Instead they’re concentrating on trucks, SUVs, and crossovers, which have higher profit margins and growing demand.
What’s next? Almost certainly, even more job losses.
Car factories are at their most efficient when they run at full capacity. Right now America is capable of producing many more vehicles than there’s demand for — roughly 3.2 million vehicles per year, according to Kristin Dziczek, vice president of industry, labor and economics at the Center for Automotive Research. (GM accounts for about 1 million of that.)
The logic of efficiency means that yet more factories are likely to close.
GM warned the steel tariffs would “undermine [its] competitiveness against foreign auto producers by . . . [increasing] global costs,” but let’s give Prznint Stupid the last word:
I asked President Trump about General Motors as he left the White House just now. He said he’s not happy about it and he spoke to Mary Barra directly. President Trump told me the layoffs have nothing to do with his tariffs.
— Eamon Javers (@EamonJavers) November 26, 2018
Update 2: More please: