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March 4, 2019 | Trump Knows the Correct Number of Cars GM Needs to Produce

Mike 'Mish' Shedlock

Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.
GM wants to close unprofitable plants. Trump and the unions demand GM keep the plants open.

On Wednesday, GM Will End Production at its Lordstown Ohio Plant. The UAW and Trump both want Trump to keep producing cars that nobody wants.

General Motors Co said on Monday it expects to end production of the Chevrolet Cruze at its Lordstown, Ohio assembly plant on Wednesday, the first of five plants it is idling this year in North America.

Last week, the United Auto Workers union sued GM over its decision to end production and eliminate thousands of jobs U.S. auto plants, saying it violated a 2015 collective bargaining agreement. The UAW has asked a federal judge to order GM to rescind its November decision to close three plants in Michigan, Ohio and Maryland, and award damages to employees for losses from what the UAW calls GM’s breach of contract.

GM said in November it was cutting up to 15,000 jobs and ending production at five plants in North America, including one in Canada.

The job cuts have angered U.S. President Donald Trump, who has demanded GM find a replacement product for its Lordstown plant and threatened to cut GM subsidies.

Collective Bargaining

One of the obvious problems with “collective bargaining” is that unions can force business owners to do stupid things like making cars at a loss that nobody wants.

Governments do the same thing. It is a fatal flaw of all command economies and ultimately what did in the USSR.

Subsidies

Trump threatens to cut GM subsidies. I am not sure what subsidies Trump means, and perhaps he doesn’t either. There are electric vehicle subsidies but those go to the buyer, not GM.

But assuming GM has subsidies, yes, please cut them. Cut all subsidies for every company.

All-Knowing Trump

Trump didn’t mention Fed Chairman Jerome Powell by name. But he did reference “a gentleman in the Fed that likes raising interest rates, a gentleman that loves quantitative tightening, and a gentlemen that likes a very strong dollar.”

The message is clear. Trump knows where interest rates should be, what assets should be on the Fed’s balance sheet, and how many cars GM should produce, whether or not GM makes a profit on them.

Mike “Mish” Shedlock

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March 4th, 2019

Posted In: Mish Talk

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