'GM Choice Isn't About Making Everybody Happy, It’s About Business' - Consultant

Donald Trump has said that he will consider pulling General Motors’ subsidies. The US president said on Twitter that he was very disappointed with the company and their plans to close plants in some US states while leaving them open in Mexico and China. Following the president’s tweet, the automakers' shares fell by more than 3%.

On Monday, General Motors announced that it will reduce its workforce in North America by 15% and close five of its production facilities by the end of 2020.

Sputnik has discussed this with Patrick Anderson, CEO of the East Lansing-based Anderson Economic Group, a business consulting firm that works in the automotive industry.

Patrick Anderson: For a few years there's been record sales for the US auto industry, over 16 million units. Average price of a car $30,000 or up, 30,000 US dollars, it is quite remarkable how profitable, how many cars have been sold and that's a comment both on the US auto industry and the US economy, that's been extremely strong.

What you see with General Motors is they're looking ahead. They're seeing signs of a slowdown and they're taking action. They're doing exactly what you would expect a good business manager to do, namely, when you start to see sales going, start to slow down your production, reduce your cost because it looks like you're not able to sell your product.

READ MORE: Trump Takes Aim at General Motors Over JOBS

Sputnik: In your view how significant is this move by General Motors towards the US economy?

Patrick Anderson: General Motors is making the right decision, again our company, Anderson Economic Group, is headquartered in Michigan, the home state of the auto industry. We also do work all across the country and in other countries as well.

If you have a car company and your car sales start to slow down you must reduce production otherwise you will go bankrupt. This is the logic of the market. General Motors discovered this, that even they as one of the largest corporations in the world couldn't avoid that in the 80s-90s and aughts and they eventually did go bankrupt. So, I think the signal that General Motors is sending now, and in particular, the new CEO, is they're saying we're not going back to the 80s, 90s and aughts; we're not going to make the same mistakes that made us bankrupt before.

And I have to applaud them on making tough decisions. The choice isn't can we just keep everybody working and make everybody happy at no cost? No, the choice is 'do you stay in business or not'.

READ MORE: Thousands of Canadians Left Without Jobs Due to General Motors' Restructuring

Sputnik: What sort of conversations have been had between General Motors and the American administration and President Trump?

Patrick Anderson: President Trump is very accessible with his anger when he doesn't like something he doesn't even talk to his press secretary. He just communicates it directly with the world and that's quite a change from past American presidents, sometimes refreshing, sometimes startling and upsetting and everywhere in between.

In this particular case, I'm sure some conversations were held, but again, and I've been consistent with this, in general, elected officials, politicians are not particularly good business managers. They don't make business decisions particularly well. That's one of the reasons why they chose to go into politics, and it's often the fact that they just don't know as much.

READ MORE: Trump: US Could Tariff iPhones and Laptops Imported from China

Sputnik: What's going to happen now? This is obviously an initiation, is this going to be a beginning of a pattern with regard to automotive companies in the United States?

Patrick Anderson: This is a different chapter. This is a different kind of president, he directly engages with not only automotive companies, but companies like Caterpillar, companies like Boeing, GM, Apple, others where he has weighed in on individual business decisions; and is this going to be part of a new pattern, well to some degree you're seeing the pattern develop right now.

I do think that some of the threat here, for example, that we're going to get rid of the subsidies, the item that he mentioned which is a tax credit for electric vehicles is not a General Motors subsidy.

This is a President Obama era program that is largely been used by foreign car companies in the United States. Toyota and Tesla are the big gainers for that. General Motors is ironically the company that has sold the most of the electric cars among the American automakers. Generally, they are applauded for that but that program is essentially going to run out for General Motors anyway, there's a limit on the number of vehicles that can be used, so I think that was a bit of an idle threat.

READ MORE: US to Explore Imposing Higher Tariffs on Chinese-Produced Cars

Sputnik: President Trump's comments have already caused the companies stock to decline, is it likely that this company will change their decision because of the pressure that he's going to put to bear on GM now or this decision has been made, it's done and dusted?

Patrick Anderson: I think the decision is done. They've already said it, and what else are you going to do? I didn't mention earlier but I'm going to mention now that models that are produced at these plants the Impala, the CT6, the Cruze and the Volt are models that are not selling well.

They're good products and I've been in some of them, but they're not products where the sales are going up, they're products where the sales are going down. There's just no way around this, you have to stop producing vehicles if you're not selling them.

So that part of the decision is done and dusted. In terms of the white collar layoffs, in terms of some of the plants in the future, the auto industry moves pretty fast. So I think you're going to see adjustments to their production schedule whether they end their tiff with President Trump or not, but in terms of actually reducing production I think that's done and it's got to be done.   

Views and opinions expressed in the article are those of Patrick Anderson and do not necessarily reflect those of Sputnik.