sense of the Oshawa closure.
from: The Economist
Last-chance saloon
GM’s boss responds to customers’ soaring appetite for SUVs and pickups
Mary Barra idles five factories, attracting President Donald Trump’s ire
Business and finance
Nov 28th 2018
| NEW YORK
THE CAR industry’s changing fortunes have left a deep mark on Detroit’s urban landscape. Its once-bustling Fisher body plant, Ford’s Highland Park and the Packard factory became vast, abandoned graffitied shells—a sad reminder of the former might of America’s “motor city”. Now General Motors’s Hamtramck assembly plant looks likely to join the list of closed facilities. On November 26th GM announced that Hamtramck, along with four other factories in North America, and two more unspecified plants elsewhere, would not be assigned new vehicles or components to put together after next year.
News of the cost-cutting initially sent GM’s shares soaring. In total it will trim its North American workforce by a substantial 15%. Another Michigan plant is among those to be idled, as well as facilities in Ohio and Maryland, and in Ontario, Canada. The day after the announcement, however, criticism from President Donald Trump sent shares the other way. Mr Trump tweeted that he was “very disappointed” in Mary Barra, GM’s chief executive, noting that she was not shutting down plants in Mexico or China: “The US saved General Motors, and this is the THANKS we get!” He threatened to cut off GM’s access to federal subsidies for electric cars (although industry-watchers noted that this is not a concern, since GM has mostly used up its permitted allocation of such subsidies).
Mr Trump was not the only disgruntled politician. Justin Trudeau, Canada’s prime minister, tried to reassure workers about the proposed closure of the plant at Oshawa, on the shores of Lake Ontario, where GM started making cars over half a century ago. After trade liberalisation led to tighter integration of the North American car market, cars became Oshawa’s lifeblood. When the financial crisis pushed GM towards bankruptcy, Canada joined America in bailing out GM to save local jobs.
Yet the swirl of forces upending the industry means GM probably had little choice but to take some action. Car sales in America and China are already growing only tepidly. Some worry that a harsh automotive recession is coming. Capacity utilisation in the American automotive sector has plunged from nearly 90% in late 2015 to 80% now. This is a particular problem for GM, which in the past was known for a “bigger is better” mindset. On one estimate, the five North American plants to be shut down have the capacity to make 800,000 cars but are producing fewer than 300,000.
A big factor behind that gap is collapsing consumer demand for saloon cars, long a mainstay of the big car firms. Six years ago, annual sales of pickup trucks and sport-utility vehicles were roughly 7.5m in America, equivalent to sales of saloons. Now Americans buy over 12m pickups and SUVs each year, more than twice the sales of saloons. The plants that GM is winding down make the Buick LaCrosse, the Chevrolet Cruze and other saloons. Once buzzing with three shifts, these plants have been running just one shift of late.
Another trend forcing Ms Barra’s hand is rising costs. Both GM and Ford, its chief American rival, have estimated the impact on profits of the tariffs imposed by Mr Trump’s administration on a variety of essential imports (most importantly, steel and aluminium) at over $1bn each. On top of this are the heavy investments that GM must make for the future in electric-vehicle and autonomous technology. Cruise Automation, its well-regarded autonomy division (which in May attracted $2.3bn of investment from Japan’s SoftBank), expects to launch robotaxis on the streets of San Francisco next year.
Seen in this light, the cuts look sensible. Since taking over four years ago, says Colin Langan of UBS, a bank, “Mary Barra has done a phenomenal job”. She moved faster than rivals in preparing for the future, he notes, by selling off GM’s loss-making Opel division in Europe and pulling out of several unpromising emerging markets. Nor will her cuts hit the factory floor alone—they include a vow to trim GM’s executive ranks by a quarter. In total the changes will lower the firm’s annual cost base by $6bn by 2020. Mr Trump may attack her and unions will revile her. But tough decisions are needed if GM is to survive another downturn and without another bailout.
Business and finance
Nov 28th 2018
| NEW YORK
* * *
From the Friday, 30 November L.A. Times:
Trump and leaders of Mexico and Canada sign new trade pact to revise NAFTA, but uncertainty remains
President Trump and the leaders of Canada and Mexico signed a revision of the quarter-century-old North American Free Trade Agreement early Friday, but their ceremony did not disguise the tensions remaining or lessen the doubts of whether a new Congress would approve the pact.
At the event, on the sidelines of an international summit opening in Buenos Aires, Trump touted the hard-fought deal as "a truly groundbreaking achievement" and proudly held up the signed agreement for the cameras at the conclusion of a short ceremony. With Democrats taking control of the House in January, its passage through Congress remains uncertain, but the president professed confidently that he didn’t expect “much of a problem."
Democrats have signaled they won’t support the deal without additional protections for workers, though it calls for some more safeguards than the agreement it would replace. The revised pact, which comes after a long, difficult negotiation, won't replace NAFTA until it's been approved by the legislatures of all three countries.
“Battles sometimes make great friendships," Trump said, looking to put a positive gloss on his fraught relationship with Canadian Prime Minister Justin Trudeau.
But Trudeau, who considered not attending the ceremony that Trump was so eager for, refused to play along. He opted not to hold up the agreement to showcase the leaders’ signatures. Most notably, he refused during his brief remarks to refer to the agreement by the name that the brand-conscious Trump had given it — the United States-Mexico-Canada agreement, or USMCA, an acronym that Trump says recalls the title of a catchy hit of 40 years ago, “YMCA.”
"The new North American Free Trade Agreement maintains stability for Canada's entire economy," Trudeau said, using the name that dates to the early 1990s for the three nations’ accord, which Trump has been intent on repackaging as his own.
“That’s why I am here today,” Trudeau continued, saying the agreement “lifts the risk of serious economic uncertainty that lingers throughout a trade renegotiation process.”
Trump since his campaign had called NAFTA the worst trade deal in history, though much of it is carried over in the new version. The president falsely claimed the new deal was "the largest trade deal ever made" (the Trans-Pacific Partnership, from which he withdrew the United States, was larger), and asserted that it will lead to "high wages and higher wages" in the auto industry and bring back jobs that have been moved overseas.
Trump did not refer to General Motors' recently announced plans to cut jobs at five American factories, four in the United States and one in Canada, but Trudeau did, calling it a "heavy blow." He urged Trump to remove tariffs on Canadian steel and aluminum, which have been cited as a factor in GM’s decision to cut costs.
“Make no mistake, we will stand up for our workers and fight for their families and their communities,” he said, before addressing Trump directly. "Donald, it's all the more reason why we need to keep working to remove the tariffs on steel and aluminum between our countries.”
Despite Trump’s hostile rhetoric about unauthorized immigrants crossing into the United States from Mexico, he appeared to be on better terms with that nation's president, Enrique Peña Nieto, who was serving his final day in office -- and, in Trump’s view, going out on a high note by signing the trade agreement.
“It really is an incredible way to end a presidency,” Trump said. “You don’t see that happen very often.”
Peña Nieto, who leaves office highly unpopular and whose party’s chosen successor was soundly defeated by a leftist challenger in July, said, according to a translator, that the new agreement “aimed to preserve the view of an integrated North America with the firm belief that together we are stronger and more competitive.”
Prior to the signing ceremony, Peña Nieto awarded Jared Kushner, the president’s son-in-law and advisor, who was involved throughout the trade talks, the Order of the Aztec Eagle, Mexico’s highest award. He pinned a medal to Kushner’s jacket as Trump and top administration officials looked on.
Kushner effusively praised Peña Nieto, saying he "put Mexican interests first even when it wasn’t popular." Kushner also celebrated what he called “a historic moment” in the relationship between the United States and Mexico.
The events preceded the opening of the first full day of the Group of 20 Summit, an annual gathering of the leaders of the world’s most developed nations. Yet Trump began the day by illustrating that what was on his mind was the controversy he left behind: the special counsel’s investigation of him, his campaign and possible collusion with Russia’s interference in the 2016 election.
With an early tweet, Trump defended the continued negotiations by his private company over a proposed luxury tower in Moscow while he was running for president in 2016, saying it was “very legal & very cool.”
On Thursday, as Trump was leaving Washington for Argentina, his former attorney and fixer, Michael D. Cohen, pleaded guilty to lying to Congress about that project, and implicated the president. Trump, who has repeatedly denied any prior dealings with Russia, in his tweet again mocked the investigation led by special counsel Robert S. Mueller III as a “Witch Hunt!”
“Oh, I get it! I am a very good developer, happily living my life, when I see our Country going in the wrong direction (to put it mildly). Against all odds, I decide to run for President & continue to run my business-very legal & very cool, talked about it on the campaign trail...” Trump tweeted before leaving his hotel for his first meeting, a short one with Argentinian President Mauricio Macri at Casa Rosada, the famous pink governmental palace.
He added in a second tweet: “Lightly looked at doing a building somewhere in Russia. Put up zero money, zero guarantees and didn’t do the project. Witch Hunt!”
Trump did not mention the Russia investigation during brief comments before sitting down with Macri, whose father, the president noted, was a former business partner.
7:25 a.m.: This article was updated with staff content.
This article was originally published at 4:50 a.m.
This article was originally published at 4:50 a.m.
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