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John Goreham Contributing Writer, GM-Trucks.com 6-12-2019 We've recently reported on two major investments by General Motors in its American manufacturing plants. We have also recently reported on GM's closing of five North American plants. Why is GM investing in some plants, while closing others? Obviously, GM considers this to be a good business decision, but what is becoming pretty clear is that GM will be building the high-volume trucks it sells in North America and primarily inside the borders of the U.S., while it shifts to imported crossovers for its high-volume family vehicle models. There are two reasons that underly this shift. Before we get to those two reasons, let's list off the newest family model vehicle introductions by General Motors, and look at where GM has shifted work on other family vehicles. First up the newbies. The Encore and Envision are two new Buick models that GM introduced over the past half decade. The Encore is imported from South Korea and Mexico. The Envision is imported from China. Next up, GM introduced the Chevy Trax, which is a clone of the Encore. Also made outside of the U.S. GM then introduced the Chevy Blazer, which it builds in Mexico. Most recently, GM has introduced the new Encore GX and Chevy Trailblazer. There are derivations of the Encore with more space. They are also imported. GM also shifted the manufacturing of its Chevy Equinox and GMC Terrain from Canada to Mexico. These models make up the bulk of GM's non-truck sales volume. There are two main reasons why GM has shifted its family vehicle business away from the U.S and Canada. Cost and import duties. On the cost side, GM's plants are among the most expensive to operate. This is partly due to the United Auto Worker's successful wage and benefit gains over the past half-century. These workers earn a bit more than the non-union workers who build Hondas, Toyotas, and Nissan inside of the U.S. However, they earn dramatically more than the workers in Mexico, China, and other overseas markets. Other reasons that plants inside the U.S. are more costly to operate than plants in China and Mexico are taxes, environmental costs, and safety costs. The same unions represent workers who build GM's trucks in expanding American plants. However, trucks are protected by a 25% import duty, and that tariff had nothing to do with President Trump. It was promoted by President Kennedy as far back as 1962 and was implemented by President Johnson in 1964. The official name of the order signed by Pres. Johnson, and kept in place by every president since (both Democrat and Republican) is Proclamation 3564. Because of this 55-year-old tariff, hundreds of thousands of American workers have jobs building trucks and parts for trucks. The North American Free Trade Agreement allows GM and other truck makers to build trucks in Canada and Mexico if they so choose without paying the import duty, and most have truck manufacturing operations in those countries to some degree. However, a long-running but fading sentiment in America to buy American has helped influence where the plants are located. There is no tariff that protects crossovers in this fashion. America does have small import duties on vehicles from some countries, but none are double-digit duties like the 25% on trucks. This is why GM is shifting its high-volume family vehicle production and jobs to cheaper markets. It is not alone. Ford builds its new EcoSport crossover that replaces the Focus in India. Jeep's Renegade and Fiat's 500X are imported from Italy. The new Jeep Compass crossover is made in Mexico. Interestingly, the Honda CR-V, Nissan Rogue, and many other "foreign brand" top-selling crossovers are built in America. In non-UAW plants. Top of Page Image Note: GM CEO Mary Barra shakes hands with UAW President Dennis Williams.
