GM Lays Off Michigan Workers as Chinese Operations Grow

Bailed-out U.S. auto manufacturer steadily moving factories, jobs across the Pacific

General Motors plans to lay off as many as 1,100 workers at the Lansing Delta Township Assembly plant, eliminating one-third of its third shift workers when it phases out production of the first-generation GMC Acadia in just two months.

The cuts come after years of GM expansion in China — a country whose trade imbalance with the United States has been a focus of President Donald Trump.

“China’s government has made the auto industry a leading priority for decades, pursuing a policy of forcing foreign automakers to partner with Chinese firms and steadily transfer technology to them.”

GM actually managed to get bailed out by both countries, but China could be getting a better return on its investment.

U.S. taxpayers paid about $50 billion to assist GM. A Chinese corporation provided $500 million. But it’s China that has become the focal point for GM’s research and development and a strong export base. It’s the only bailed-out U.S. automaker to export cars from China to the United States.

“China spent far less on the rescue of GM’s China operations and it has subsequently been the beneficiary of huge transfers of R&D, manufacturing and exports. Less money in and more benefits out indicate that they got the better deal,” Edward Niedermeyer, an auto-industry analyst, co-founder of Daily Kanban and the former editor of the blog The Truth About Cars, told LifeZette in an email.

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Niedermeyer reported for Quartz Media last year that GM “received a secretive Chinese ‘bailout’ that appears to have turned America’s largest automaker into a Trojan horse for its Chinese partner.”

GM’s press office did not immediately response to inquiries from LifeZette.

Most American taxpayers are aware of the auto bailout for GM and Chrysler, funded through the Troubled Assets Relief Program in 2008, started by the Bush administration and continued by the Obama administration.

Not everyone knows about the 2009 loans to GM from Shanghai Automotive Industry Corporation (SAIC), owned in part by members of the Shanghai municipal government, which means the Communist Party, including former Chinese Premier Jiang Zemin.

During hard times for Detroit in the Great Recession, GM’s Daewoo Automotive Technology Company that oversaw Korean operations was also struggling.

The federal government prohibited the two auto companies from spending TARP money on foreign operations, so GM got help from SAIC — taking what had been a mutual partnership since 1995 to making SAIC the majority partner after GM sold 1 percent to SAIC for $500 million. SAIC secured $400 million in commercial bank loans for GM in November 2009 to turn around GMDAT. SAIC also got a 50 percent stake in GM India.

This turned into a boon for GM deals with SAIC, which made news with the following deals:

  • In August 2010, GM and SAIC reached a joint agreement to develop low-range four-cylinder engines and dual-clutch transmissions, according to AutoBlog. Work on the engines and transmissions was set occur in both Pontiac, Michigan, and Pan Asia Technical Automotive Center in Shanghai.
  • GM announced a $5 billion investment, in collaboration with SAIC, to develop compact Chevrolet vehicles to be exported to fast-growing emerging markets, Reuters reported in July 2015.
  • In August 2015, GM and SAIC announced a planned $16.14 billion investment in the Chinese market to increase Chinese production by 65 percent, The Wall Street Journal reported. The plan was to develop 10 new or upgraded models from 2016 through 2020.
  • In December 2015, GM announced that its Buick brand would import the compact Envision vehicle from China to the United States. This marked the first time one of the U.S. big three automakers imported a vehicle from China, the Detroit News reported. At the time, United Auto Workers President Dennis Williams and Vice President Cindy Estrada released a published statement that called GM’s plan a “slap in the face to U.S. taxpayers and the men and women who worked so hard to save GM during its darkest time.”
  • “General Motors continues to use the slogan, ‘Build it where you sell it.’ The company should adhere to their own words and should reconsider this decision and place this product into one of their facilities in the United States of America,” the UAW statement continued. “The men and women of GM who are so proud of their role in saving their own company deserve better and so do the American taxpayers who invested so much in GMs future.”
  • A year later, GM announced another luxury vehicle, the Cadillac CT-6 plug-in Hybrid Sedan, would be built in Shanghai. The decision was “rooted in pragmatism,” Business Insider reported, because the company planned to sell most of the vehicles in China. To deal with air pollution, the governments of larger Chinese cities were making it difficult to register vehicles that were not hybrid or battery-powered.

While this seemed a business transaction, all major Chinese businesses are tied to the government in China, Niedermeyer said.

“While the Chinese ‘bailout’ was presented as a business transaction, there is no doubt that it was motivated at least in part by government priorities,” he said. “By assisting GM in the form of loan guarantees, SAIC and its government partners kept the story low profile and avoided conflict with the U.S. government. China’s government has made the auto industry a leading priority for decades, pursuing a policy of forcing foreign automakers to partner with Chinese firms and steadily transfer technology to them.”

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GM is entitled to make smart business moves — particularly after having made so many dumb business moves leading up to its near-bankruptcy in 2008. It would be up to U.S. policy makers to hold the firm to a higher standard to expand U.S. operations, considering the massive TARP infusion. Much of the company’s ability to pay back the TARP loan rested on its expansion in the Chinese market.

The Obama administration had little reason for holding them to a higher standard. But under a Trump administration, dedicated to seeing more buying American and hiring American, GM could be either motivated or feel the pressure to be more of a U.S. company than a top Chinese exporter.

“This issue does not appear to be on Trump’s radar, but in my opinion it should be. If and when he is made aware of the facts, I would expect him to take action but it’s hard to predict what form this action could take,” Niedermeyer said. “My guess is that the administration would target GM’s Chinese imports with tariffs, but the response could be more thorough than that and might possibly even include a requirement to pay back the money taxpayers lost on the bailout.”

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