I’ve noticed more and more SUVs in parking lots and on the highways, so it’s no surprise that General Motors is cutting production of some of their non-SUV and truck models. My wife has a small Acura Integra, and her pet peeve is that it’s always sandwiched between two SUVs in any given parking lot.
I’ve always enjoyed designing and building things, and I’m wondering why GM is closing down entire plants as opposed to re-configuring them. I grew up a few miles from the manufacturing belt in the Lehigh Valley of Pennsylvania, home of Bethlehem Steel, Mack Trucks and countless others.
Vacated automobile manufacturing sites often have environmental problems, but no more so than other manufacturing sites. They typically become eyesores and remain reminders of our industrial failures. Few closed sites ever become new factories, for whatever reasons.
Why can’t Amazon, for example, use an obsolete GM manufacturing facility, versus cramming a new site into a super-congested Crystal City location, which already has insurmountable traffic congestion? I’m not to say one industry pats another industry on the back — after all this is brutal competition — but we have to start thinking win/win if the U.S. is to remain the top economy worldwide.
The general sense is that car components can be more cheaply manufactured overseas, due to reduced labor costs, and then either brought in and assembled here or brought in entirely and sold as GM products.
The manufacturing processes and international transposition of parts has reached a refined art form in the past generation. One of the leading professions in today’s job market is “industrial engineering,” which translates to defining specifics and metrics for parts and then deciding where and how to make and assemble them — generally overseas. My alma mater, Penn State, has one of the top ranked industrial engineering programs (currently No. 7), and the grads are all getting good jobs.
Although most economists cringe at President Donald Trump’s heavy-handed use of tariffs, I can understand his frustration with what is going on in our industrial system. Perhaps tariffs are a way to show he’s trying to address the loss-of-jobs problem. But, at the same time, most economists strongly disagree with using them at all, and most believe them to eventually slow down the world economy. In the end, it is throwing the baby out with the bath water.
Some analysts have argued that development of electric powered automobiles is key to GM’s future and they would like to do it overseas.
According to a recent article in the New York Times, the federal government offers a $7,500 tax credit to buyers of battery-powered and plug-in hybrid vehicles, an incentive that many consumers have found attractive. The full credit, however, is available only on the first 200,000 electric vehicles an automaker sells. Once that threshold is reached, the credit falls to $3,750 for six months, then to $1,875 for an additional six months. Beyond that, there is no tax credit. Thus, as President Trump has argued, this law conceivably could be modified or eliminated to discourage GM plant relocation. On the other hand, environmentalists may oppose the battery-powered credit elimination. Nothing is assured.
Personally, I think Mr. Trump either didn’t want to take the time to come up with a solution to one of his core campaign themes, or he isn’t listening to the right people. This action shouldn’t have come as a surprise. We still have some of the best minds in this area in America. We spend all of our political capital defending a brutal and murderous regime in Saudia Arabia, a truly evil empire, or playing footsie with arch-enemy Vladimir Putin.
Mr. Trump has never been at ease with corporate CEOs — probably because he is a narcissist and a terrible listener — but the time has come to get some top minds working on this problem while we still have some time to fix it. I have some thoughts on this topic, but for sure nobody with political capital is going to listen. The answer likely involves considerable horse trading and holding people’s feet to the fire.