Trump's Twitter Attack on GM and the UAW Strays From the Facts

(Bloomberg) -- President Donald Trump is mixing faulty narrative and falsehoods with some fair criticism to attack General Motors Co. and the United Auto Workers union for the closing of an auto factory in Ohio, a state that will play a pivotal role in his re-election bid.

GM’s Chevrolet Cruze plant in Lordstown, Ohio, built its last car on March 6 and has no new product to build. The automaker has been transferring many of the factory’s workers to other plants around the U.S., making its revival unlikely. Here’s what Trump has been saying, and what he’s gotten right and wrong.

While the U.S. economy was strong in the middle of 2018, growth slowed toward the end of the year, and economists forecast that this downward trend will continue in early 2019.

The auto market has also been considerably less upbeat than Trump’s tweet suggests. The pace of U.S. car and light truck sales slowed in February to the lowest annualized rate in in 18 months, according to researcher Autodata Corp. Analysts at Morgan Stanley earlier this month warned that month-end dealer inventory swelled to a February record of more than 4 million vehicles, a 21-month high.

Trump is correct about the jobless rate, but otherwise loses the plot. GM may have sold roughly half as many Chevrolet Cruze cars in 2018 as it did four years earlier, but demand for compact sedans has cratered for virtually all automakers competing in the U.S.

While auto manufacturers have been announcing investments in expanding American plants or building new ones, it’s largely been to boost sport utility vehicle and truck capacity, and GM already has plenty of factories making SUVs and pickups.

Picking on David Green, president of UAW Local 1112, which represents workers at the Lordstown plant, also was off the mark. If GM keeps open any of the four factories it has announced are at-risk of being shut, it will be a result of negotiations between GM management and UAW leadership in Detroit.

“Ultimately, our fate rests with the international union and the corporation,” Green said in a phone interview. He’s made considerable effort to sway GM into keeping the plant open, including by joining with a local economic development chamber to form a coalition called Drive It Home Ohio.

GM won’t say if Barra blamed the union in a conversation with Trump, which would have been out of character for the company’s affable chief executive officer. The automaker issued a statement saying the fate of all four of the U.S. plants it may close will be the result of contracts talks with the union. The company’s statement hinted Barra made that point to Trump, as opposed to directly condemning the union.

The trouble GM has with keeping any of the factories open is that, even in a relatively strong economy and healthy U.S. vehicle market, all four plants were running at about 50 percent of production capacity or less, according to researcher LMC Automotive. Several others also are underutilized.

Here, Trump appears to have conflated when GM the UAW’s existing contract expires -- and when negotiations toward a new pact will take place in earnest -- with when the company and the union will hold talks about the Lordstown factory. GM and the UAW have been discussing the fate of the plant since the automaker announced in November that Cruze production would end.

Where Trump has a stronger point is about Mexico. Most of the almost 1 million vehicles GM imported from neighboring North American countries last year were built in Mexico. That was about one-third of its U.S. sales and more than any other carmaker, according to LMC. This year, GM is ramping up production of the revived Chevrolet Blazer SUV south of the border.

Mexico’s auto assembly workers only make roughly $5 an hour on average, according to the Center for Automotive Research, and their unions have far less bargaining power. While the United States–Mexico–Canada Agreement that the Trump administration negotiated last year narrows the labor-cost gap, it wouldn’t close it.

Under the USMCA deal to replace Nafta -- which hasn’t been ratified -- at least 40 percent of a car will have made by workers whose pay averages more than $16 an hour. UAW workers make more than that already and are likely to seek raises in contract talks this year.

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