Trump Asked Agencies to Look at GM Subsidy Cuts, Source Says

(Bloomberg) -- President Donald Trump has asked federal agencies to look for ways to cut subsidies to General Motors Co. following the automaker’s plans to cancel production at several factories and lay off thousands of workers, according to a person familiar with his instructions.

Trump said in a tweet Tuesday that his administration is “looking at cutting all @GM subsidies,” including tax breaks for the purchase of electric cars. But a change in the tax break would require action by Congress.

Trump has directed a broader examination of ways for the federal government to block funds to GM, the person said Wednesday. Fox Business reported earlier Wednesday that the Energy Department was examining funds provided to GM. Other agencies have received similar instructions, the person said.

GM, the largest U.S. automaker, declined to comment. The company has received about $333.5 million in federal spending in the past 12 months, according to a U.S. government website that tracks federal expenditures. More than 93 percent of that came through vehicle purchases for use by government departments.

GM is also a frequent recipient of major research and defense contracts. Among the largest are a Department of Defense project that began in 2000 and earned the company $167.9 million as well as two Department of Energy grants of more than $100 million related to electric vehicles and batteries awarded during the Obama administration. And U.S. taxpayers lost more than $10 billion in the rescue of the company during the financial crisis a decade ago.

Putting any real pressure on GM through cutting off federal funds will be difficult, experts said. For one thing, the Detroit-based company is on track to generate an estimated $144.2 billion in revenue this year so the federal spending wouldn’t hurt its bottom line much.

And federal contracts and grants often have provisions allowing the government to cancel them, but only if GM failed to live up to the terms or for some other clear cause, said Lynn Ross, a professor at Georgetown University’s McCourt School of Public Policy.

“I’m sure there are ways out of these contracts, but not just because the president is angry about what GM has done,” Ross said. “I mean, the whole system is set up to prevent things like political attacks.”

The General Services Administration, which buys vehicles for U.S. agencies, said in an emailed statement that the White House had not given it any instructions regarding General Motors purchases, and that it planned to honor all contractual obligations to the company.

Tax Credits

Trump on Tuesday singled out electric vehicle tax credits as one possible way to punish GM. Currently, consumers who buy electric cars can get a $7,500 federal tax break. The credit begins to phase out for a manufacturer after the first 200,000 eligible vehicles. Tesla Inc. has reached that threshold and GM is expected to reach it this year.

Trump’s hands are tied on the tax credit as well, according to Joseph Cordes, a professor of economics and public policy at George Washington University. The credit likely can’t be altered by executive order because it’s embedded in the tax code and specifies its purpose and eligible recipients, he said. Changing it would require an act of Congress.

“I don’t really think he can do anything, to be honest with you,” Cordes said.

While the tax-writing House Ways and Means committee in theory could alter the tax credit’s language in a way to exclude GM’s vehicles, Cordes said lawmakers are unlikely to do so.

“We do not use our tax code to punish companies for doing something the president doesn’t like, so I think it’s a lot of bluster,” he said.

©2018 Bloomberg L.P.