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November 28, 2018 11:30 AM, EST

Trump Threatens Punishment After GM Announces Layoffs, Plant Closures

GM Sign Anthony Lanzilote/Bloomberg News

WASHINGTON – President Donald Trump threatened Nov. 27 to end consumer subsidies for electric cars sold by General Motors in the wake of the company’s announcement of layoffs and plant closures in Michigan, Ohio and Maryland.

In two tweets Nov. 27, Trump said he was “very disappointed” in GM and its CEO, Mary Barra, for the closings, which include assembly plants in Detroit-Hamtramck and Lordstown, Ohio. He also suggested he would take whatever steps necessary to protect workers.

But it was unclear what steps Trump could take to punish GM — and whether he could unilaterally reduce subsidies, which largely are limited to those for electric cars, since those are set by law — though the federal government has hundreds of millions of dollars in contracts and other arrangements with GM.

A change in federal law, however, would require congressional action. And a president could face legal challenges if he tried to limit a company’s ability to compete for federal awards and contracts.

“Nothing being closed in Mexico; China,” Trump said in his tweets. “The U.S. saved General Motors, and this is the THANKS we get! We are now looking at cutting all @GM subsidies, including for electric cars.”

Trump also said that GM made what he called a big bet in China some years ago but that he doesn’t “think that bet is going to pay off. I am here to protect America’s Workers!”

On Nov. 26, GM announced cuts involving about 14,000 employees in North America, including about 8,000 white-collar layoffs. After talking to Barra, Trump said Nov. 26 afternoon that he was “not happy” about the announced closures and that pressure would be brought to bear on the company.

In his remarks Nov. 26-27, Trump also referenced the federal government’s $51 billion investment in the company, made in 2008 and 2009 as moves were made to keep it and Chrysler from going under. The federal Treasury recouped most of that investment, though about $11 billion of the investment in GM was never repaid. The government recouped much of the money by selling stock it held when the company emerged from bankruptcy.

GM also is a large federal contractor — with contracts in fiscal 2015 worth about $266 million — and also receives tens of millions a year in federal grants, with about $360 million in awards in recent years, including those for research done for the Defense Department and to improve battery technology and other advances.

Late Nov. 27, GM put out a statement saying, “We appreciate the actions this administration has taken on behalf of industry to improve the overall competitiveness of U.S. manufacturing” and said it remains “committed to maintaining a strong manufacturing presence in the U.S.”

It did not directly address the president’s remarks, however. Barra said Nov. 26 the moves were being made to reposition the company at a time of downturn in auto sales overall.

Trump campaigned heavily in Michigan and across the Midwest in 2016 promising to protect and increase manufacturing jobs, especially those in the auto sector. But on Nov. 26, he took heat — especially from Democrats — who said those promises rang hollow in the wake of GM’s announcement.

Some analysts said they were worried about Trump making such an active threat against the company.

“I am very troubled by the president of the United States tweeting such things. Can you imagine the lawsuits Trump would have filed if the government had tried to interfere in his businesses over that last 50 years like he is threatening [here]?” said Jon Gabrielsen, a market economist who advises automakers and auto suppliers.

Jeremy Acevedo, manager of industry analysis at Edmunds, meanwhile, said Trump’s tweets are “a bit of an empty threat when it comes to the [electric vehicle] tax credit” since GM will likely see that credit begin to be phased out anyway.

As an incentive to purchase electric cars, the Internal Revenue Service provides an up-front credit of up to $7,500 for a new vehicle, available to each automaker until it sells 200,000 qualified vehicles, after which time the credit begins to phase out. GM was expected to cross that 200,000 threshold sometime in the last three months of this year.

GM has asked for an extension, however. It was unclear what steps would have to be taken if the Trump administration moved to limit GM’s subsidies without affecting those due other automakers.

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