Driving while tweeting could hurt US carmakers

For carmakers in the US, the price of honesty is high. President Donald Trump’s preoccupation with the auto industry was on show again over the past week, when he tweeted that he had asked General Motors Co. Chief Executive Officer Mary Barra to sell or “do something quickly” with one
of the plants it is idling under a wide-ranging cost-cutting plan.
When Barra first came out directly with GM’s plans to cut around 15 percent of its workforce and idle multiple plants in North America last year, investors applauded the company’s proactive approach. The wrath of Trump was unleashed, however, with the president labeling the decision as “nasty” and warning that GM wasn’t going to be “treated well.”
In truth, Barra was only bowing to inevitable. US carmakers are being forced to retool and upgrade. The auto industry doesn’t have enough capacity to meet demand for the kind of vehicles (mostly trucks and SUVs) that consumers want to buy.
The market is heavily dependent upon imports, mostly from Canada and Mexico. While the US produced around 11 million light vehicles last year, 17.3 million were sold. That ratio remained broadly flat over the last decade, meaning even massive disruptions haven’t really changed the amount that automakers are prepared to invest in US car plants vis-a-vis the rest of the world.
Other automakers have taken pains to apply a presidential sugar-coating to the bitter pills they’re administering. Fiat Chrysler Automobiles, for instance, last month announced grand plans to invest $4.5 billion in five plants, adding thousands of jobs. Masked under that headline, it said separately that it was slashing 1,371 workers at an Illinois plant. Despite what Elon Musk might say, it’s not simple or cheap to buy, sell or establish a carmaking plant in the US.
Trade has been a relatively small factor in the employment declines in the US auto industry over the last couple of decades, according to a 2016 working paper by researchers at the US International Trade Commission. The big money is now being spent developing the next generation of vehicles. Automakers and their suppliers invested more than $20 billion in 2017 developing new technology like
alternative fuels and new materials.
That’s quite enough for the industry to be getting on with without letting the fear of a Trump tweet drive the pace of restructurings and overhauls. Automakers will be better served by keeping their eyes on the road ahead, not the social media distractions along the way.
—Bloomberg