General Motors is set to lay off thousands of people around the world and will be pulling the plug on at least a half dozen cars, including the Chevrolet Volt. The move is sending jitters through global markets, suggesting that the global economy may be set for a slowdown.
General Motors is looking to save upwards of $6 billion per year by thinning out its management ranks and laying off factory workers. Cutting costs is now a priority for GM. President Trump’s trade war has apparently resulted in a spike of raw material costs for automakers. Ford previously claimed that it absorbed a billion dollar loss due to the trade war.
Some critics have blamed Trump for GM’s layoffs, arguing that his trade war is hurting the very companies he appears to be trying to help. Trump himself laid blame at the feet of managers. In fact, Trump actually called GM’s CEO to give her a piece of his mind.
So far, Trump is arguing that GM’s plants will be back in operation in the future, but making different cars. Whether or not this is true remains to be seen. American consumer tastes are changing, however, with sedans falling out of favor. Chrysler and Ford have announced plans to severely curtail sedan sales in the United States, shifting instead to smaller crossover SUVs.
Further, the economy regularly goes through a boom-and-bust cycle. In the past, economists had tried to claim that the business cycle was ending, that regular, stable expansion would be the norm. Few serious economists will make such claims today. While GM’s layoffs did come as a bit of a shock, most other economic indicators remain strong. Unemployment is at historical lows, and the economy has been expanding.
Should a recession hit before the 2020 Presidential race, Trump could find himself fighting an even tougher uphill battle. As the saying goes, when it comes to voters “it’s the economy, stupid.” Even if the slowdown is limited to just the auto industry, Trump could be in trouble. Trump needed votes from Michigan, Ohio, Wisconsin, and Pennsylvania to secure the White House. The auto industry forms a major part of the regional economy and any slowdown will likely hit local communities hard.
