Trump Criticizes GM Over its Mfg. Plants In China

Trump Criticizes GM Over its Mfg. Plants In China
September 2, 2019

 

Once again, US President Donald Trump has condemned automaker General Motors for a decline in the US workforce and moving its automobile manufacturing to China even after receiving a federal bailout. Referring to a Bloomberg report, Trump pointed out that GM is only the third-largest automaker in terms of union-represented workers, behind competitors Ford and Fiat Chrysler. Notably, GM was once the largest private-sector employer in the US. The stock of General Motors closed at $37.09, up $0.18 or 0.49% from earlier close.

As per Bloomberg report, GM currently employs only 46,000 UAW (United Automobile Workers) in the US. The automaker is often targeted by Trump as it continues to slash its domestic production and move its operations to countries such as China and Mexico.

In March, Trump suggested Mary Barra, CEO of General Motors “do something quickly” to resume operations at Lordstown, Ohio where the production was suspended for over a week.

Previously, the President also made scathing criticism of GM for shutting down factories in Maryland, Ohio, and Michigan. In this regard, last November, Trump warned withdrawal of subsidies given to GM, primarily for electric-vehicle production. Trump’s statement was directed at GM’s strong position in the electric car market in the US where the automaker, along with Tesla, benefited from tax incentives offered during Obama’s Presidency.

Last Saturday, through a tweet, Trump once again asked GM to shift its operations to the US and not the other way. “General Motors, which was once the Giant of Detroit, is now one of the smallest auto manufacturers there. They moved major plants to China BEFORE I CAME INTO OFFICE. This was done despite the saving help given them by the USA. Now they should start moving back to America again?”

Notably, Bloomberg’s report has mentioned that since coming out of bankruptcy, GM has invested about $23 billion in the US, almost five times its capital expenditure in Mexico.

In the first week of August, GM reported second-quarter results that surpassed analysts’ expectations. For the second quarter of 2019, the automaker reported revenue of $36.10 billion, compared with $36.80 billion in the similar period last year. Adjusted earnings for the recent quarter were $1.64 per share, down from $1.81 per share in the comparable quarter last year. The Wall Street analysts anticipated the company to earn $1.43 per share on revenues of $35.93 billion.

During 2Q19, the company delivered 747,000 vehicles in the US, primarily led by sales of crossover vehicles, which recorded 17% y-o-y growth.

For fiscal 2019, the company continues to forecast adjusted earnings of $6.50 and $7.0 per share. Analysts anticipate the company to report a profit of $6.62 per share. GM also predicts adjusted automotive free cash flow of $4.50 billion to $6.0 billion. The comments made by the US President are expected to keep the stock range-bound in the short-term.

Technically, the stock remains range-bound between 31 and 42. The stochastic oscillator is declining towards the bearish zone. As a result, we can expect the stock to remain bearish in the short-term.

gm - technical analysis - 2nd Sept 2019

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Richard W

Richard W

Richard is the guy who know everything there is about the financial industry, working in a top firm for over 15 years, he will give the lowdown on some of the biggest companies in the world


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