President Trump believes he can command markets like King Canute thought he could the tides. But General Motors has again exposed the inability of any politician to arrest the changes in technology and consumer tastes roiling the auto industry.
GM said it plans to eliminate 15 percent of its salaried workforce in North America and stop production at five plants that employ 6,700 workers, including one in storied Lordstown, Ohio.
The U.S. auto maker plans to redeploy some $4.5 billion in annual savings to more profitable truck, electric-car and autonomous-vehicle manufacturing. Investors cheered by bidding up GM’s stock, but the president reacted like a spurned suitor. “You know, the United States saved General Motors and for her to take that company out of Ohio is not good,” he said Monday, adding Tuesday that he might end GM’s subsidies. GM shares promptly fell 2.6 percent.
As a candidate, Mr. Trump lambasted Ford for shifting production to Mexico, then took credit when the company announced it would keep its Lincoln MKC in Louisville, Kentucky. But both decisions were motivated by market changes, and so is GM’s.
GM is essentially following Ford and Fiat Chrysler by phasing out small-car production. Last year GM cut production by one-third at Lordstown and nearly half at a plant in Oshawa, Ontario. Keeping these factories open at lower levels of output would waste human and physical capital that could be deployed to more productive and profitable units.
The Trump administration deserves credit for giving auto makers flexibility to make more of the cars consumers want by relaxing corporate average fuel-economy standards. GM’s third-quarter profit in North America surged 37 percent even as U.S. sales fell due to strong demand for pricier pickups and SUVs.
Boosting production of higher-margin vehicles is imperative as auto sales flatten after eight years of robust growth and rising interest rates curb demand. Material costs have also increased due to Mr. Trump’s steel and aluminum tariffs. GM said in July the tariffs could raise its costs by as much as $700 million this year, which is equal to the pay of about 9,400 employees.
Mr. Trump and Democrats seem to believe that with the right mix of tariffs and managed trade they can return to a U.S. economy built on steel and autos. This is the logic behind the administration stipulating in its new trade agreement with Mexico and Canada that 40 percent to 45 percent of a vehicle’s value must consist of parts made by workers earning at least $16 an hour.
But an economy doesn’t run on nostalgia. Mr. Trump thinks his trade machinations can overrule the realities of the marketplace, but he’s as wrong as Barack Obama was about the climate and regulation. Fine with us if he wants to end subsidies for all car companies. But if he intervenes to make GM less competitive, Mr. Trump will merely hurt more workers.