Trump warns GM could lose subsidies over layoffs

Trump warns GM could lose subsidies over layoffs

Trump warns GM could lose subsidies over layoffs

"I spoke with her and I said, 'This country has done a lot for General Motors - you'd better get back in there soon.' That's Ohio. We are now looking at cutting at GM subsidies, including [subsidies] for electric cars", the president said in a tweet Tuesday afternoon.

The United Autoworkers Union (UAW) Vice President Terry Dittes said in a statement that "This callous decision by GM to reduce or cease operations in American plants, while opening or increasing production in Mexico and China plants for sales to American consumers, is, in its implementation, profoundly damaging to our American workforce".

GM's actions add up to the biggest restructuring for the U.S. No. 1 vehicle maker since its bankruptcy a decade ago, and mark a turning point for the North American auto industry.

GM shares jumped after the announcement, closing up 4.8 per cent on the day.

The largest USA automaker said on Monday it would cut thousands from its North American workforce, slash production and eliminate some slow-selling auto models. Another two plants will close outside North America. They could close or they could get different vehicles to build.

Plants without products include assembly plants in Detroit; Lordstown, Ohio; and Oshawa, Ontario. Also at risk are two transmission plants, one outside Detroit and another in Baltimore. But investors obviously like what they see so far: the company moving to cut its labor costs to brace for lower vehicle sales, even if it means putting thousands of workers on the unemployment line.

The plant in Lordstown, Ohio, that makes the Chevrolet Cruze compact auto is on the possible closure list.

The heavily government-subsidized Chevy Volt, which the Obama administration promoted as the future of GM, is being discontinued, along with several other sedans, including the Cruze, the Impala, the Buick LaCrosse and the Cadillac CT6 and XTS.

"The actions we are taking today continue our transformation to be highly agile, resilient and profitable, while giving us the flexibility to invest in the future", CEO Mary Barra said in the press release.

General Motors benefits from a federal tax credit for electric vehicles, but the programme phases out after a manufacturer sells 200,000 cars. It was about 50 percent cars just five years ago.

That may have played a role in the decision to lay off what amounts to 8 percent of GM's global workforce. "Don't move. Don't sell your house.' So far, President Trump has been asleep at the switch and owes this community an explanation", said Northeast Ohio Rep. Tim Ryan, who represents Lordstown. GM has said sagging demand for small cars largely prompted the cuts.

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.

In a statement, GM said that the company was "committed to maintaining a strong manufacturing presence in the US, as evidenced by our more than $22 billion investments in USA operations since 2009".

The likely shutdowns have already opened up GM to political pushback, with Canada's Prime Minister Justin Trudeau tweeting that he has expressed "deep disappointment" with Barra directly.

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