Moneybox

Following Trump’s Prodding, GM Is Adding More Than 1,000 U.S. Jobs. Deal or Faux Deal?

U-S-A.

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Since Nov. 8, President-elect Donald Trump has claimed credit for—or been credited with—saving or creating U.S. jobs at firms as varied as Carrier, Ford, and Amazon. In Deal or Faux Deal? we analyze whether these deals are really Trump’s doing, if they’re good for America, and if they’re even deals at all.

The “Deal”: General Motors announced Tuesday it will invest an additional $1 billion in U.S. manufacturing operations, a move that will retain or create 1,500 American jobs. The company also said it would bring work on axle manufacturing for pickup trucks to Michigan, “including work previously done in Mexico.” That will add 450 jobs. And GM said that a supplier “has committed to make components for GM’s next-generation full size pick-up trucks in Michigan, moving 100 supplier jobs from Mexico to the U.S.”

Did Trump Make This Happen? No. It’s certainly true that automakers have a somewhat contradictory wish list for the incoming Trump administration. GM has placed a big bet on electric cars, and the sales of such vehicles are supported by a hefty federal tax credit as well as by government support for car-charging infrastructure. At the same time, GM and other automakers are seeking relief from the higher mileage requirements that the Environmental Protection Agency has enacted. Under new management, the EPA is likely to be in a position to help. Elsewhere, GM may be hoping that Trump adheres to the status quo. Sourcing components and vehicles in Mexico is a big part of GM’s strategy, which means it would oppose the kinds of tariffs and import taxes that Trump has proposed.

So Trump, who has previously shamed GM on Twitter and thanked the company there Tuesday, can get some credit for the phrasing of Tuesday’s announcement, with its focus on bringing back work from Mexico. “The U.S. is our home market and we are committed to growth that is good for our employees, dealers, and suppliers and supports our continued effort to drive shareholder value,” GM CEO Mary Barra said, trumpeting the announcement as a conscious investment in America.

But let’s be real. General Motors and American auto manufacturers in general are kicking ass thanks to seven straight years of economic growth, low gas prices (fueled by fracking), and low interest rates. These are the reasons why GM is even in a position to make new U.S. investments. And its record auto sales are being fueled by sales of big vehicles like pickups and SUVs, which companies like GM and Ford generally make in the U.S. anyways, not overseas.

In addition, GM has been in investing mode in the U.S. since it was bailed out by the Bush and Obama administrations. In its announcement, GM noted that it had invested “more than $21 billion in its U.S. operations since 2009.” That comes out to be about $3 billion annually. Over the past several years, the company has changed the shape of its operations and its workforce: fewer locations, more work being done closer to production, more robots, more software coders and engineers. And since the supply of engineers and IT workers is much higher in the U.S. than in Mexico or other developing markets, that has meant onshoring. In the announcement, GM said that in the past four years, it has “reduced more than 15,000 positions outside the U.S., bringing most of those jobs to America.”  Tuesday’s announcement is great news, but it’s also more of the same.

Is It Good for the Company? Yes. General Motors doesn’t act impulsively. It’s responding to long-term shifts in its core markets. So long as gas remains cheap, investing to enhance capabilities in producing pickup trucks is a smart and logical move. And, as noted, the value of this investment is comparatively small in comparison to the investments GM has made in the previous years.

Is It Good for America? Yes. In fact, these moves, like GM’s prior investments, are really good for America. Manufacturing investment won’t restore life to many regions of the Rust Belt, or increase the demand for coal, and won’t magically raise wages. In fact, the move won’t create many jobs directly. But compared with services, manufacturing calls a much wider range of other disciplines and companies into action: parts suppliers, truck drivers, logistics companies, the power plant, security guards, landscapers, and so on. Everyone wins—including, of course, Donald Trump.

Ruling: Faux Deal.