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Trump and his useless rage

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Henrik Böhme
November 27, 2018

US carmaker General Motors (GM) has announced 14,000 job cuts and the closure of several plants worldwide, including four in the US. President Donald Trump is furious, but he's partly to blame, says DW's Henrik Böhme.

USA | General Motors Flint Assembly Plant
Image: Getty Images/B. Pugliano

Of course, as always, someone else is to blame. Of course, the GM decision has nothing to do with his own policies. Of course, the GM boss is "playing around with the wrong person." And of course, GM should stop making cars in China and build them in Ohio instead. This is how Donald Trump sees the world: It's plain and it's simple.

Except that it's not

General Motors is an icon of US industry. Its cars include legendary brands such as Chevrolet, Cadillac and Buick. But it's no different from other carmakers from around the world in that it is currently going through a process of gigantic upheaval — the rocky road from the combustion engine to more environmentally friendly cars and driverless vehicles.

This is a huge paradigm shift. People will still want to buy cars, but building the new cars that people want will require fewer people to build them. And that means heavy investment is needed now to stay on course for the long, sharp bend in the road ahead.

Volkswagen (VW) is no more immune than anyone else. There too, the future has arrived a little sooner than expected. Thousands of jobs will disappear there too, sooner or later. Billions will be invested as well — €44 billion ($50 billion) to be precise.

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DW business editor Henrik Böhme

That's the amount the German carmaker has pledged to invest over the next five years in electric mobility, autonomous driving, mobility services and digitization, knowing that without such investment, it would very quickly become irrelevant. VW appears to have learned the lessons of the dark chapter that was Dieselgate.

But back to Trump

By all accounts, Trump's tough economic policies seem to be paying off, particularly the trade battles with his bete noire, China. The US economy continues to grow strongly, while the labor market figures are consistently positive.

Experts have found that the US-China trade tariff battles are benefiting the US economy, while the Chinese one struggles. But in the US car industry at least, the imposed higher tariffs on steel and aluminum from abroad are starting to have a negative effect.

In the last quarter, GM announced additional costs of $300 million, resulting from having to pay more for steel and aluminum. Analysts reckon the additional costs are already into the billions, and things are similarly difficult at GM competitor Ford as a result.

Volkswagen plans shift to greener tech

Trump wants GM boss Mary Barra to stop production in China and bring it back to America, but that will not work. The auto industry is global and often produces in the markets it sells to. And even if GM bowed to Trump's wrath, the Chinese would immediately impose punitive tariffs on any GM car exported from the US to China.

Time to wake up

And finally, the US president would do well to remember the many foreign car manufacturers with big plants in America — Toyota and the three German automakers BMW, VW and Mercedes, to name some examples.

BMW exports so many cars from their plant in Spartanburg, South Carolina, that they are the largest US exporter of cars. The bosses of these European companies have been invited to the White House recently, although it's not clear exactly what Trump makes of them.

Perhaps Mr Diess (VW), Mr Krüger (BMW) and Mr Zetsche (Mercedes) can try to explain to the president the kind of challenges the automotive industry is facing right now — and that GM is no exception.

Because all the angry whining does not help and there are realities that even Donald Trump must wake up to.

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Henrik Böhme Business editor focusing on international trade, cars, and finance@Henrik58