GM to Invest $1 Billion in U.S. Manufacturing Operations

GM to Invest $1 Billion in U.S. Manufacturing Operations

Jan 17, 2017

By David Welch and Sohee Kim, Bloomberg Markets

General Motors Co. announced a $1 billion U.S. investment plan involving new models and plant updates long in the works, becoming the latest automaker to answer to pressure from Donald Trump to create jobs.

The nation’s top automaker will add or retain about 7,000 salaried and hourly workers, including almost 2,000 in domestic factories, spokesman Pat Morrissey said. Made days after Trump urged GM to follow Ford Motor Co. and Fiat Chrysler Automobiles NV in detailing U.S. spending plans, the announcement includes product updates, manufacturing changes and a lending expansion all decided before the president-elect’s public appeals to invest.

Earlier Tuesday, Korea’s Hyundai Motor Co. and Kia Motors Corp. said they’ll increase U.S. investment over the next five years and consider building a new plant in the country. Trump praised Ford and Fiat Chrysler last week for plans to spend on U.S. factories after threatening for months to slap Mexico-built vehicles with a 35 percent import tax. The president-elect is taking credit mostly for expenditures companies would’ve made anyway, according to Maryann Keller, an independent auto industry consultant.

“This is the normal course of business,” Keller, who’s based in Stamford, Connecticut, said of GM. “All they’re doing is announcing investments that they would have made anyway.”

Carmakers are eager to cooperate with the incoming administration as they prepare to ask for favors including weaker fuel economy rules and lower corporate taxes. And the auto industry isn’t alone: Wal-Mart Stores Inc. will create about 10,000 retail jobs, the country’s largest private employer said Tuesday.

“Thank you to General Motors and Walmart for starting the big jobs push back into the U.S.!” Trump wrote on Twitter.

‘Big Stuff’

Less than two minutes into his first formal press conference since the election on Wednesday, Trump highlighted Ford’s decision to cancel a $1.6 billion factory in Mexico and expand an existing plant in Michigan. Fiat Chrysler committed $1 billion toward making three new Jeeps in the U.S. and enabling a Michigan facility to manufacture a Ram pickup now produced in Mexico. He told reporters he hoped GM would follow.

“With all of the jobs I am bringing back into the U.S. (even before taking office), with all of the new auto plants coming back into our country and with the massive cost reductions I have negotiated on military purchases and more, I believe the people are seeing ‘big stuff,” Trump wrote in a series of tweets Tuesday.

GM will begin to bring axle production for its next-generation full-size pickups to Michigan operations, which will included work previously done in Mexico, creating 450 U.S. jobs, the company said Tuesday. This decision was made several years ago because it’s “right for the business,” said Morrissey, the spokesman. About other 1,500 workers will be added or retained at factories detailed during the course of the year, and GM will add about 5,000 employees who’ll develop advanced technology or join its lending subsidiary GM Financial.

The automaker budgets about $9 billion a year toward capital expenditures, including for new models and factory upgrades. GM announced at least $2.9 billion in U.S. investment in 2016, bringing its total since 2009 to $29 billion.

The U.S. is no longer the biggest market in the world for the Detroit-based company — that position belongs to China, where GM plans to introduce 18 new or refreshed vehicles this year. Cadillac foresees becoming its latest brand to see Chinese consumers overtake Americans in five years.

Mexico Criticism

Trump targeted GM earlier this month for importing a small number of Chevrolet Cruze hatchback models from Mexico to the U.S. The company has made separate recent announcements that it would permanently cut 3,300 jobs at three passenger-car plants and temporarily slow production at five factories in states including Michigan and Ohio, due to slack demand.

GM also continues to invest in Mexico. In late 2014, the company said it would spend $5 billion on new plants in the country by 2018, creating 5,600 jobs. Facilities making the Chevrolet Equinox and GMC Terrain, shown last week at the North American International Auto Show in Detroit, account for about $1 billion of those outlays.

German and Japanese automakers also are in Trump’s cross hairs, with Toyota Motor Corp. and BMW AG drawing threats of tariffs on Mexico-made cars. BMW sees “no reason” to change plans, said Peter Schwarzenbauer, who heads the automaker’s Mini and Rolls-Royce brands and its car-sharing business.

Hyundai and its affiliate Kia said Tuesday they plan to invest $3.1 billion in the U.S. over the next five years, up from the $2.1 billion spent the last five years. South Korea’s two largest automakers may produce Hyundai’s upscale Genesis vehicles and a U.S.-specific SUV in the country, said President Chung Jin-haeng, who also oversees strategic planning for Kia.

“We expect a boost in the U.S. economy and increased demand for various models as President-elect Trump follows through on his promise to create 1 million jobs in five years,” Chung said. “We will actively consider introducing new models that have increasing demand and profits.”


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