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Notable and quotable: GM is right to close US sedan factories
View related content: Carpe Diem
Below is a Letter to the Editor that appeared in today’s Wall Street Journal (“GM is Right to Close U.S. Sedan Factories“). Since today’s edition of the WSJ didn’t feature a Notable and Quotable item, I’ve taken the liberty of featuring this on CD today as a great Notable and Quotable letter, one of the best I’ve read in a long time — Mr. Modzelewski really nails it here on some key points about “global economics and auto-industry trends” that Tariff Man (or more accurately “Tax Man”) doesn’t yet understand.
President Trump again needs someone to plug the gaps in his understanding of auto-industry trends and global economics. He told General Motors it should stop making cars in China and open a new plant in Ohio (“GM to Close Plants, Cut Jobs,” page one, Nov. 27). Why? Because the president says he loves Ohio. He also loves its 18 Electoral College votes.
China is a very important market for auto makers in general, and GM in particular. The growing Chinese auto market is the biggest in the world, and GM sells more vehicles in China than it does in the U.S. So why would GM take capacity out of China?
Meanwhile, car-buying dynamics are changing fast in the U.S., especially among young people and urban dwellers, who prefer ride-sharing to car ownership. And millions of car owners are keeping their cars for a decade or longer. That’s another trend that GM CEO Mary Barra must feel the need to get in front of as she executes strategies to prepare GM for a potential market downturn and other factors impacting future car sales.
A global company like GM can’t cave into nationalistic political policy when it is navigating complex forces of change while making long-term decisions that require capital reallocation, favorable consumer responses and, no doubt, some sorry consequences for a portion of its employees.
Jack Modzelewski, Chicago
MP: As I’ve mentioned before, it’s important to recognize that large US-based multinational corporations (MNCs) like GM operate in a hyper-competitive international marketplace — they produce and sell their products globally, they hire workers globally, they invest in capital assets, infrastructure and real estate globally, and they compete with foreign rivals in an intensely competitive global marketplace. US-based MNCs like GM are already exposed to constant risks, challenges, and gales of Schumpeterian creative destruction, which force them to focus relentlessly on operational efficiencies and low production costs to survive, and they have to make decisions at the global level to compete with their foreign rivals and maintain or grow market share. If GM increasingly sells more cars in China than the US, it makes perfect economic and business sense to allocate production accordingly. Saddling American firms like GM with additional, unnecessary and avoidable political burdens, uncertainties, risks and outright bullying from a protectionist, nationalist, jingoistic xenophobic, “America First” administration that pressures firms like GM to think domestically under political pressure rather than globally for economic reasons isn’t a formula to make American commerce great. It’s a formula that’s guaranteed to make US companies like GM much weaker and the country much poorer, and in the process eliminate, not create more, jobs for US workers.