F Ford Motor Company

By Mike Colias 

General Motors Co. has landed on Donald Trump's hot seat at a tricky time.

The president-elect's criticism of the auto maker's Mexican imports, leveled in a tweet Tuesday morning, comes as it plans to lay off thousands of workers in two states pivotal to the Republican's November victory. And, Mr. Trump also is spotlighting GM just weeks before output of two revamped crossover SUVs begins in Mexico, according to people familiar with production plans.

It is unclear if Mr. Trump will pursue GM with the same vigor with which he ripped Ford Motor Co.'s plans to relocate small-car production. After Ford said Tuesday it won't build a new factory south of the border, Mr. Trump appeared ready for the next challenge.

"Thank you to Ford for scrapping a new plant in Mexico," he tweeted Wednesday morning. "This is just the beginning -- much more to follow."

Mr. Trump's transition team didn't return a request for comment. He ripped GM for importing a small car, the Chevrolet Cruze, from Mexico, saying in a Twitter message it should pay a "big border tax" on those vehicles, the first such attack he has launched against the Detroit giant.

Mr. Trump's salvo came as a surprise. The auto maker had no forewarning about the tweet or specific discussions with the incoming administration's transition team about the company's Mexican production, said two people familiar with the matter. A GM spokesman declined to comment on the criticism.

The criticism is likely to be an unwelcome overhang as GM holds news conferences at its hometown auto show and seeks recognition for electric vehicles and other product advances over the next week. Focus will shift to the company's plans to lay off more than 3,000 factory workers in Michigan and Ohio starting later this month, and questions about whether bringing products made in Mexico back to the U.S. could save some jobs.

The fight with Mr. Trump comes after years of government oversight stemming from the bankruptcy that took place at the beginning of the Obama administration and the billions of dollars in taxpayer money it used to restructure. Chief Executive Mary Barra, recently picked to serve on a policy council of business leaders advising the incoming administration on economic matters, has helped steer the company through a major safety-recall crisis and delivered strong financial results.

But Ms. Barra faces vulnerability in places like Lordstown, Ohio, where GM on Jan. 23 will lay off about 1,200 at a plant because of weak demand for compact Chevrolet Cruzes that are assembled there. Workers at the factory cranked out Cruzes 24 hours a day for years before a slowdown in demand for small cars. More than 3,000 workers will continue to assemble Cruze sedans on two shifts.

A low-volume hatchback derivative of that model, built in Mexico, is now arriving in U.S. showrooms in an effort to boost sales. That could be good news for dealers, but it is a bitter pill for the Ohio factory workers facing cutbacks.

GM said that just 2% of U.S. Cruze sales in 2016 were built south of the border. GM makes the hatchback in Mexico for markets in Latin America and elsewhere, but didn't see enough U.S. demand to justify the investment to make them at the Lordstown factory.

The company also is gearing up to make a much larger number of compact crossover SUVs, including the Equinox, at a plant in San Luis Potosi, Mexico, two people with knowledge of the plans said.

Mr. Trump has been making "thank you" tours of states that helped him to victory, including Ohio. The situation in Lordstown, where United Auto Workers officials are currently trying to retain as many jobs as they can, provides a backdrop for a president-elect looking to flex additional influence.

Ford's decision to scrap a plant was easier because it wasn't yet operational and needed more time to complete. GM's manufacturing schedule, meanwhile, was likely set years ago and would be costly to unwind, analysts say.

Choosing where to assemble a vehicle is a complex process involving union negotiations, location of suppliers and other factors, said Michelle Hill, a vice president in the auto practice at Oliver Wyman, a consultancy. Even retooling a plant to build a different body style of the same vehicle can take two years, she said.

Ford in November agreed to keep producing a small number of Lincoln SUVs in Kentucky, rather than moving them to Mexico, after talks with Mr. Trump's team. While more than a symbolic gesture, the costs are likely far less than if GM were to tear up its plans to make the Cruze or Equinox in Mexico.

Warren Browne, an independent auto consultant and former GM executive who left the auto maker in 2009, said Mr. Trump will have to weigh his quest for job creation against the potential harm of pressuring the Detroit companies to make decisions they otherwise wouldn't.

"I think Toyota and Nissan would love for General Motors and Ford to put more of their small-car production back in the U.S.," Mr. Browne said, noting that the Asian auto makers' nonunion workforce is a cost advantage. "That would weaken the companies creating the jobs he wants."

Write to Mike Colias at Mike.Colias@wsj.com

(END) Dow Jones Newswires

January 05, 2017 05:44 ET (10:44 GMT)

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