General Motors Announces Austerity Program

GM's director, Mary Barra, reacts to a changing automotive world. Americans hardly buy small cars or sedans, but almost only SUVs and vans. Above all, he closes the factories where the storekeepers are made.

For a long time, Ford and Fiat Chrysler have almost completely transformed their product line into SUVs and vans. It's now GM's turn.

Barra also wants to invest more in future technologies such as electric cars and autonomous driving. In Silicon Valley, GM founded "Cruise", an autonomous driving company in which Softbank and Honda also invested. GM is investing more than $ 1 billion a year in Cruise.

How does the market evaluate the measure?

Analysts have enthusiastically accepted them. They have long criticized the fact that GM operates too many factories in different places. Barras' plans are "the sign of a healthier and more disciplined auto sector," wrote Citigroup badyst, Itay Michaeli.

"GM understands it," enthuses Arndt Ellinghorst of Evercore ISI, the automaker, in the highest tones. "Mary Barra introduces GM in the 21st century," enthuses badyst Rebecca Lindland of Kelley Blue Book.

The stock price had risen significantly last Monday after the announcements. But on Tuesday, the price fell further after Trump's threats.

What role did Trump's economic policy play?

Trump wants to strengthen the national economy and create jobs with its "America First" policy. Thanks in part to its tax cuts, the economy is booming and the unemployment rate is at its lowest level in 50 years. At the same time, however, the rates put in place a few months ago have a double negative impact on US companies.

Tariffs on steel and aluminum make auto production more expensive, and GM and Ford have cost more than a billion dollars this year. Almost more severe, Chinese countermeasures have hit manufacturers. Beijing levies tariffs and special taxes of 40% on American cars. China is the largest car market in the world, all American manufacturers rely heavily on it.

Is this a sign that Trump's industrial policy is not working?

In the short term, Trump can celebrate success. According to a new study by the Ifo Institute in Munich and the KOF Institute in Zurich, the United States has so far received more than $ 18 billion in Chinese tariffs.

Chinese manufacturers should support three quarters of the load. In the medium and long term, however, the United States could pay a high price.

Customs encourages companies to redirect their production to the respective sales market. Tesla example: with Chinese import tariffs, sales of electric car manufacturer in China have collapsed by more than half. Tesla now wants to speed up the construction of the planned Shanghai plant.

In other words, Trump achieves exactly the opposite of its industrial policy. Companies do not decide what the US president is asking them to do, but what is strategic for them.

And then?

At the G20 summit in Buenos Aires in a few days, Trump and Chinese President Xi Jinping want to meet. The signs are not good, Trump threatens with ever higher duties. If the trade dispute intensifies, the US will further reduce its tariffs, but will lose jobs in the long run.