Are Auto-Makers Bailing On Their Job-Creation Pledges?
Carmakers quickly kowtowed to Trump after his upset victory over Hilary Clinton on Nov. 8, allowing the then-president-elect to take credit for their pledges to hire thousands of workers and keep U.S. factories open.
At the time, fears of a 35% import tariff were enough to keep them in line. But while Trump still has the support of his voter base, the administration is having a hard time whipping up votes in Congress. Trump has struggled to pass a plan to repeal and replace Obamacare – a law that almost nobody in the Republican party wants to keep. So it’s difficult to imagine the administration passing something as controversial as the import tax any time soon.
But, now that its become apparent that Trump doesn’t wield absolute authority over Republicans in Congress, The Wall Street Journal is asking: When will the corporate sector jump ship?
Detroit has been an engine of growth for U.S. employment since the financial crisis, with General Motors Co. , Ford Motor Co. and Fiat Chrysler Automobiles NV adding tens of thousands of jobs to keep pace with growing demand and fund autonomous-car engineering and other moonshot programs. Total auto employment manufacturing, including parts suppliers, hit 945,000 in April, 50% higher than industry employment in 2009 when GM, Chrysler and several auto suppliers were undergoing bankruptcy restructuring.
Earlier this year, company executives promised to add head count at certain factories in response to criticism from President Donald Trump.
Now, those executives are quickly retreating.
GM and Ford are making cuts to their U.S. workforces that could far outpace the job commitments made in recent months amid political pressure. Amid softening U.S. car sales and mounting investor skepticism about Detroit’s ability to weather the industry’s first downturn in nearly a decade, auto executives are facing a tough choice in whom to please: Wall Street or the White House.
Auto sales have fallen for four straight months. Inventory is near record highs. Used-care sales prices are falling. R&D budgets have become bloated. And interest rates are half a percentage point higher than they were five months ago.
Unless the Trump administration can swiftly furnish the 4% economic growth, these companies have every incentive to pull back. And judging by Ford’s decision earlier this week to slash 10% of its workforce, they’re not willing to wait.
Auto stocks have largely missed out on the broad market rally; At $33, shares of GM are trading at their November 2010 IPO price. Ford shares are down 12% YTD at $10.94, while Fiat-Chrysler has seen modest gains.
Meanwhile, Tesla shares are soaring even as Elon Musk and his merry band of futurists have yet to turn a profit. And that alone should be enough to make auto execs like Mary Barra, who receive an increasing percentage of their compensation in stock, forget all those promises made during the heady days leading up to the inauguration.