Of course, as always, someone else is to blame. Of course, the GM decision has nothing to do with his own policies. Of course, the GM boss is “playing around with the wrong person.” And of course, GM should stop making cars in China and build them in Ohio instead. This is how Donald Trump sees the world: It’s plain and it’s simple.
Except that it’s not
General Motors is an icon of US industry. Its cars include legendary brands such as Chevrolet, Cadillac or Buick. But it’s no different to other carmakers from around the world in that it is currently going through a process of gigantic upheaval — the rocky road from the combustion engine to more environmentally friendly cars and driverless vehicles.
This is a huge paradigm shift. People will still want to buy cars but building the new cars that people want will require fewer people to build them. And that means heavy investment is needed now to stay on course for the long, sharp bend in the road ahead.
Volkswagen (VW) is no more immune than anyone else. There too, the future has arrived a little sooner than expected. Thousands of jobs will disappear there too, sooner or later. Billions will be invested as well — €44 billion ($50 billion) to be precise.
DW business editor Henrik Böhme
That’s the amount the German carmaker has pledged to invest over the next five years in electric mobility, autonomous driving, mobility services and digitization, knowing that without such investment, it would very quickly become irrelevant. VW appears to have learned the lessons of the dark chapter that was Dieselgate.
But back to Trump
By all accounts, Trump’s tough economic policies seem to be paying off, particularly the trade battles with his bête noire China. The US economy continues to grow strongly, while the labor market figures are consistently positive.
Experts have found that the US-China trade tariff battles are benefiting the US economy, while the Chinese one struggles. But in the US car industry at least, the imposed higher tariffs on steel and aluminum from abroad is starting to have a negative effect.
In the last quarter, GM announced additional costs of $300 million, resulting from having to pay more for steel and aluminum. Analysts reckon the additional costs are already into the billions, and things are similarly difficult at GM competitor Ford as a result.
Trump wants GM boss Mary Barra to stop production in China and bring it back to America, but that will not work. The auto industry is global and often produces in the markets it sells to. And even if GM bowed to Trump’s wrath, the Chinese would immediately impose punitive tariffs on any GM car exported from the US to China.
Time to wake up
And finally, the US president would do well to remember the many foreign car manufacturers with big plants in America — Toyota and the three German automakers BMW, VW and Mercedes, to name some examples.
BMW exports so many cars from their plant in Spartanburg, South Carolina, that they are the largest US exporter of cars. The bosses of these European companies have been invited to the White House recently, although it’s not clear exactly what Trump makes of them.
Perhaps Mr Diess (VW), Mr Krüger (BMW) and Mr Zetsche (Mercedes) can try to explain to the president the kind of challenges the automotive industry is facing right now — and that GM is no exception.
Because all the angry whining does not help and there are realities that even Donald Trump must wake up to.
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Road to insolvency – motor city Detroit’s bankruptcy
Unsustainable pile of debt
It’s official – Detroit is broke. On Thursday (18.07.2013), the city formally filed for bankruptcy. The debts of the formerly proud city amount to some $18 billion (13.7 billion euros). For years, Detroit had been fighting for financial survival. In his report, the insolvency manager said filing for bankruptcy was the “only reasonable alternative.”
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Road to insolvency – motor city Detroit’s bankruptcy
Turning point?
Packard Motor Car Company stopped producing automobiles in the late 1950s. Over the decades, Detroit piled up a huge mountain of debt. In recent years, municipal expenditures exceeded city revenues by some $100 million per year. Long-term obligations also weighed heavily on the city budget. Now, Detroit is officially insolvent.
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Road to insolvency – motor city Detroit’s bankruptcy
Buzzing metropolis
In boom years, there were periods when 2 million people lived in Detroit (this picture shows downtown Detroit around 1970). That number was later more than halved. Today, fewer than 700,000 people live in Detroit – a third of them in poverty.
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Road to insolvency – motor city Detroit’s bankruptcy
Fathers of ‘Motor City’
It was automobile giants like Henry Ford who gave Detroit its nickname “Motor City” and brought prosperity to the metropolis. In this picture, he’s posing outside his Detroit factory. His competitors General Motors and Chrysler continue to be based in Detroit.
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Road to insolvency – motor city Detroit’s bankruptcy
Music of a generation
Internationally, “Motown” stands for music above all. The label by that name churned out a series of world stars from 1960 onwards: Diana Ross, Stevie Wonder, Marvin Gaye, and the Jackson Five (pictured) – their list of artists reads like a who’s-who of Top 10 musicians of the era. In 1972, the company relocated to Los Angeles.
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Road to insolvency – motor city Detroit’s bankruptcy
Long and painful crash
By that time, the “60 years of decline” of Detroit – as the governor of Michigan called it – were well underway. Reasons included fierce competition from car companies in Japan, but also mismanagement at the level of both automobile companies and of the municipal administration.
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Road to insolvency – motor city Detroit’s bankruptcy
Rising unemployment, rising crime
Today, tens of thousands of buildings stand empty in Detroit. Almost half of the city lights don’t work. The crime rate has risen along with unemployment – the murder rate, for example, is again as high as it was 40 years ago. But police are unable to cope: Detroit citizens have to wait an average of 58 minutes after placing an emergency call. Nationwide, that average is 11 minutes.
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Road to insolvency – motor city Detroit’s bankruptcy
American dream
Rapper Marshall Mathers, better known as Eminem, is considered the most successful musician of the 2000s. At age 12, he moved to a poor neighborhood on the outskirts of Detroit with his mother, where it didn’t take long for him to make a name for himself as an underground rapper. In 1999, he had his breakthrough with “The Slim Shady” LP. He has won both an Academy Award and a Grammy.
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Road to insolvency – motor city Detroit’s bankruptcy
Upswing on the horizon?
General Motors and Ford have been recovering over the past few years. The hope is that with the help of the possibilities provided by the creditor protection program, the city of Detroit itself will one day get back on its feet financially once again.
Author: Nina Haase
