Opinion: Trump lost the tariff war with China?

The hopes that in Buenos Aires, Trump and Xi Jinping will agree to end the tariff war, were not justified. They decided not to introduce additional tariffs in the new year. Moreover, the representative of the US administration clarified that the United States had warned that if in the next 90 days there was no agreement with China on some trade issues, the duties would increase to the previously planned mark in 25%. So, the American auto industry is doomed to a sharp peak.

Фото: Depositphotos

Problems of General Motors

In late November, President Donald Trump threatened auto giant General Motors to cut subsidies and demanded to return to Ohio. The anger is caused by GM announcing the closure of four plants in the states of Ohio, Michigan and Maryland in the USA, as well as a plant in Canada, in connection with which personnel will be reduced by 15%, that is, by 27 000 people.

“I am very disappointed by the decision of General Motors and Chairman of the Board of Directors Mary Barra to close plants in Ohio, Michigan and Maryland. However, there is no talk of closing factories in China and Mexico. The USA saved General Motors, and this is the gratitude we receive for it! We are now considering cutting all General Motors subsidies, including subsidies for electric vehicles. “I’m here to protect American workers!” Trump concluded.

It can be understood - he went to victory in the presidential race, promising to return the swollen jobs, then carried out tax reform in favor of the corporations, hoping that they would expand production, and then such an affront.

Concern General Motors 26 in November announced that it had set a goal to increase the inflow of free funds by $ 2020 billion by the end of 6 by reducing costs, layoffs and ending the release of unprofitable brands. And it should be noted that things are going badly at GM.

Since March 30, she has begun to reduce plant employees in St. Petersburg (Russia), offering compensation in 7 salaries. GM intends to leave only a small number of personnel to maintain the company in a state of conservation. Why? And because the Americans lost the competition to the Europeans and the Japanese even before the introduction of new tariffs. The Russians said that the holy place is never empty, and it will be taken by competitors.

GM then announced it would cease operations in Venezuela. The reason was the confiscation of the last plant of the company in the state. He was taken under the control of the authorities 19 April, cars of the corporation were seized. At GM, they stressed that these actions of the authorities caused enormous damage to the company. The Venezuelan division of the corporation employed 2700 people.

Фото: Depositphotos

At the end of May, the US Department of Justice caught up with GM in criminal activities related to hiding information about a defect in the car ignition system. Due to a malfunction, more than 100 people are believed to have died. The auto giant is facing a record fine, the amount of which could exceed $ 1 billion.

In early September, GM announced that it was withdrawing 4,28 million vehicles worldwide due to a defect in airbags. The problem is in the on-board computer, which can go into test mode, after which the airbag may not work during an accident. The defect has already led to the death of one person. Recall cars released from 2014 to 2016 year: Buick LaCrosse, Chevrolet SS and Spark EV, as well as cars 2014-2017 of the years: Buick Encore, GMC Sierra, GMC Yukon, Cadillac Escalade, Chevrolet Corvette, Trax, Caprice, Silverado, Tahoe, Suburban.

Practice, in principle, is common and all companies resort to it, but one thing is superimposed on the other, and as a result a rather gloomy picture emerges. So, in early October, GM announced the recall from Russia of 70,2 thousand Chevrolet Aveo vehicles sold from November 22 2011 of the year to September 11 of 2015 of the year, which revealed the risk of cracks in the power steering booster. This is especially true when operating in low temperatures.

And, of course, the factor of China and the trade war with it played a role. First, there, at the world's largest car market, consumer demand is slowing. Secondly, the increase in tariffs for American cars has reduced their imports. US automakers have become one of the main victims of the tariff war. However, the matter is not only in tariffs - China introduces new fuel-efficient technologies, and GM vehicles do not correspond to them. GM stock quotes, having peaked in June, have since declined. In parallel, the market share declined in all geographic regions.

Yes, the second quarter ended on a positive note: sales in the US increased by 4,6% compared to Q2. 2017 - before 756 376 of new cars, and GM's management did not forget to curtsy about the administration: that tax reform led to an increase in consumer income, and a strong economy inspired them to buy. But even then, sales of many Chevrolet models (Camaro, Corvette, Cruz, Impala, Malibu, Sonic and Volt), Cadillacs CT6, ELR, Escalade fell sharply on an annualized basis. ESV (zero sales), SRX (five pieces), five Buick models and three GMC models.

However, the American market is not the main one for the corporation, while in China the growth was modest, just 0,7% - to 858 344 machines. Seeing the failure of many models, the company was going to refresh its product range in the second half of the year, adding new 10. But it was late - in the third quarter there was an expected collapse in sales - by 11,1%, to 694 638 of new cars in the US market.

It is caused by falling interest in many models, and as a result, the recession has affected more than half of them, although the economy is still strong, and tax reform continues to operate. But the trade war started by Trump was more significant: sales in China went down immediately by 15% compared to the same period last year - before 835 934 machines.

In vain, the president blames the leadership of GM for the lack of patriotism, it is simply trying to save the company from the destructive consequences of its activities. And it’s really stupid to blame GM for not closing factories in China - in its main market. It would be simply suicidal. However, judging by the trends, this market will continue to shrink for American companies.

Trouble "Ford"

But maybe GM's problems are its own problems? No, she is not alone! Even earlier, in early October, Ford announced that it would cut even more jobs, making the workforce more compact.

“In many ways [the reorganization] involves making various decisions about strategy,” said Bob Shanks, the company's CFO, adding that the goal is not only to cut costs, but also to improve the company's performance.

Morgan Stanley expects to cut about 12% or 24 thousand from 202 thousand company jobs around the world. The decision is part of a plan to reduce costs by $ 25,5 billion.

The company's share price has also declined substantially this year (and indeed has been falling for four years already), and Ford is lagging behind its competitors, selling on average only 32,8 vehicles per employee, while for GM this figure is 52,7. In addition, at the end of September, Ford Motor CEO James Hackett said that because of the import duties on steel and aluminum imposed by the Trump administration, the company's expenses increased by more than $ 1 billion. Shanks is echoed.

"Trump's trade policies threaten to undermine Ford's turnaround," he told NBC News.

Фото: Depositphotos

31 August, Ford also announced that the import duty for cars from China in the amount of 25%, introduced by the Trump administration, makes the production of Focus Active cars unprofitable. And he clarified that he does not plan to restart production in the USA.

"It would be unprofitable to produce Focus Active in the United States, given the expected annual sales of less than 50 thousand units and the competitive segment," said Ford spokesman Mike Levin.

Despite sales growth in North America, the Middle East and Africa, the company's net profit in Q3 fell immediately by 37% compared to the same period of 2017 of the year. This is attributed to the rise in prices of export cars of the company and the weakening of sales for this reason in Europe, South America, Asia, but mainly in the Chinese market (sales collapse of $ 480 million) - this is a consequence of the tariff war.

Summary

What conclusions can be drawn from the failures of America's leading automakers? In my opinion, they are obvious - these are systemic problems. By the way, I predicted them at the beginning of the summer - it does not require a special gift of foresight. Not only in the bad management of companies, but also in the leadership of the country. And since this is a long-term factor, there is no reason to expect improvement, moreover, the situation should worsen. And I’m not only talking about autocompany, but summarizing it for other sectors of the economy: many American companies with extensive international connections found themselves in the same position, so their inhibition is only a matter of time. I don’t want to be Cassandra, but I won’t be surprised if Boeing announces the problems soon ...

Of course, GM will not leave the market. She refuses to release sedans and go to the release of the best-selling models - SUV, hatchback, crossover and pickup. The company is actively working to create an autopilot for new cars, it will modernize production (alas, there will not be more jobs from this) and will remain the largest in the domestic car market. But the tariff war will lead to the inevitable loss of a significant share of the external market - to the greater joy of competitors. This will also affect Ford. Moreover, the damage done is already irreparable and even the rapid completion of tariff battles (which is not expected, as we see) will not allow American automakers to regain lost ground and become great again. Tens of thousands of their workers (as well as their suppliers) will have to look for another job.

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