WASHINGTON, D.C. – In case you missed it, the Youngstown Vindicator today reported that GM reported higher than expected profits in the first quarter of 2019. Today, U.S. Senator Sherrod Brown (D-OH) called on GM to invest those profits into its plant in Lordstown.
“Instead of padding shareholders’ bottom lines and building new plants in Mexico, GM should be using corporate profits and the tax windfall gifted to them by President Trump to retool the Lordstown complex in the Valley. These Ohio workers have helped create GM’s financial success and GM should treat these workers with the dignity they’ve earned by investing in Lordstown and bringing a new product to the plant” said Brown.
Brown has been fighting for Lordstown workers since GM announced layoffs at the plant, working with Sen. Portman to push GM to do the right thing. Brown and Sen. Portman met with GM CEO Mary Barra in December and urged GM to work with them to save Lordstown jobs. After the meeting, both Senators followed up with a letter pressing GM to bring a new product to Lordstown and give workers and the community the answers they deserve.
Brown has demanded that GM use its massive tax windfall from last year’s GOP tax bill to keep these jobs in Ohio. Under last year’s Republican tax bill, championed by President Trump, companies are rewarded with a lower tax rate when shipping American jobs overseas. Brown has introduced legislation, American Cars American Jobs Act, which would get rid of these incentives for auto manufacturers to ship jobs overseas. The Toledo Blade editorialized that Brown’s bill would “put America and American workers first.” At a Senate Finance Committee hearing last September, an expert witness said Brown’s American Cars, American Jobs Act would ‘absolutely’ help American autoworkers.
Brown added a provision that would incentivize the purchase of electric cars after GM announced their intention to launch more than 20 new zero-emissions vehicles by 2023. Brown is encouraging GM to bring one of those products to Lordstown.
Brown’s bill would benefit Ohio companies and workers throughout the auto supply chain. The legislation would put U.S.-made cars on equal footing with foreign-made vehicles and update the tax code to remove incentives for auto companies to offshore jobs.
The Youngstown Vindicator article can be read here and below.
Youngstown Vindicator: GM reports higher-than-expected profits for first quarter
By Ed Runyan |
General Motors’ first quarter profits – the first report since GM idled the Lords-town Assembly Complex – surpassed analysts’ expectations, with the company reporting a first-quarter net profit of $2.2 billion.
Analysts expected that GM would earn $1.11 per share, but the company earned $1.41 per share for the quarter.
GM’s $500 million investment in ride-sharing company Lyft in 2016 helped boost its first-quarter earnings by $300 million. That return helped offset otherwise slumping auto sales both at GM and in the industry at large.
The company’s earnings are down 11.5 percent from a year ago, “amid restructuring activities and softer sales,” The Detroit News reported.
“GM’s first-quarter operating results were in line with expectations we shared in January,” CEO Mary Barra said in a company news release. “My confidence in the year ahead remains strong, driven by our all-new full-size truck launch and our ongoing business transformation.”
Jessica Caldwell, a senior analyst at Edmunds, said GM likely would see a stronger second half of the year.
“The company is going through a bit of a transition, and with that comes growing pains, particularly as they phase out some of their models,” Caldwell said. “I think the second half of the year they’ll be focused more on their truck lines like other domestics. As we transfer more into the summer selling season, they’ve got more SUVs and more trucks on the market, so their prospects are stronger going forward.”
Dhivya Suryadevara, GM’s executive vice president and chief financial officer, told investors and analysts Tuesday the company expected to see the benefits of its first-quarter cost-savings measures – including the unallocating [loss of product] of its five North American plants including Lordstown – in the second quarter.
“We have made significant progress to date on the cost-savings initiative. With the savings front-end loaded, we expect to achieve a significant portion of the 2019 savings starting in quarter two,” Suryadevara said.
Meanwhile, Dave Green, president of United Auto Workers Local 1112 at Lordstown, has spoken a few times with UAW International union leaders in the past few days about the plight of the idled GM workers he represents.
“They are not making any promises but fighting for us and are committed to trying to get General Motors to bring some product to our facility,” Green said.
Green is in Detroit attending a joint UAW-GM safety conference. A joint UAW-GM leadership conference comes up Thursday and Friday.
The Lordstown complex built its last Chevrolet Cruze March 6, idling the 1,500 workers producing the car at the time. About 550 Lordstown employees have transferred to other plants since November.
Green and Lordstown Mayor Arno Hill said they don’t know enough to comment on GM’s earnings report.
The report follows a strong earnings report from Ford and weak earnings reports from automobile suppliers, Barron’s reported, saying GM’s results are “right in the middle.”
GM will begin the next phase of its full-size pickup truck launch in the second half of the year with the 2020 Chevrolet Silverado HD and GMC Sierra HD, GM said. Those vehicles will be built at Flint Assembly, where 1,000 jobs were added.
The report says GM delivered more than 665,000 vehicles in the first quarter of 2019 in the United States. “With a mix of trucks, SUVs and crossovers above 80 percent, GM earned the highest average transaction prices for any first quarter in the company’s history,” the release says.
“The Chevrolet Trax, Equinox and Colorado set first-quarter sales records, and GMC Acadia posted its best quarter ever. The Buick Enclave was up 28 percent versus a year ago.”
Economic research analyst George Zeller of Cleveland said GM’s focus on larger vehicles that produce greater profits per vehicle is “short-term thinking.”
He noted that the price of oil has risen substantially in recent months and also will rise when the state implements its 10.5 cents-per gallon tax.
I wonder “if people are going to want to keep buying these large vehicles – SUVs and trucks – when it costs a lot more to buy fuel to run them,” he said.
With the cost of the vehicle being high, owners frequently have a large car payment. “That’s where the risk is that’s affecting the entire industry,” Zeller said.
He noted that the changeover to the summer fuel blends will increase the cost. “When we get to June, July, August, you are going to have higher prices just because this happens every year,” he said.
The GM release lists investments in the United States, including GM’s Orion, Mich., assembly plant, which will produce a future Chevrolet electric vehicle, adding 400 jobs; and a second shift and 400 new jobs in Bowling Green, Ky., to support production of the next-generation Corvette.
The release also says GM “remains committed to making job opportunities available for all 2,800 U.S. hourly employees impacted by the company’s decision to unallocate plants.”
“More than 1,300 hourly employees have accepted jobs at other GM facilities supporting growth segments including trucks, crossovers and SUVs.”
Green explained, however, that late last week, another 110 Lordstown workers were offered involuntary transfers to another plant.
“So the members getting offers at other plants are not like people raising their hand” to go to another plant, Green said. “There are quite a few people getting forced, getting letters saying you can move or you will lose everything.”
Green said he does not know the total number of people who have been offered involuntary transfers, but 300 have “turned down involuntary offers and are choosing to remain in the community.”