On November 26, 2018, General Motors announced it was laying off 14,000 employees and shutting four factories in the US, one in Canada, one in South Korea, and two in undisclosed areas. Quite naturally, the US corporate news media announced GM was doing this to reduce sedan production because they were not all that profitable. Actually, GM cut 14,000 workers because of its falling share price.
GM had earned tens of billions of dollars the last few years. In 2016, after taxes, the automaker earned a global net income of $9.43 billion, a 2.6% decline from the $9.68 billion it earned in 2015. As recently as October 31 of 2018, barely two months ago, GM announced “third-quarter 2018 earnings results reflecting profitability in all core operating segments. Strong results in North America were driven by all-new full-size trucks, and crossovers. GM China equity income and GM Financial EBT were third-quarter records.” Click here for the source of information.
What the corporate news media is not reporting is that GM is opening new factories in Mexico, where it will produce the Blazer. GM also continues to invest heavily in China. So, US jobs are being exported once again. (Click here for more information.)
In the US, this means most of, if not all, 3,600 factory workers will be out of a job, though some workers could be transferred to other plants. At its operations in Oshawa, Canada, GM employs currently about 2,500 hourly workers and 300 salaried workers; and they’ll be gone. The US and Canada’s losses will be Mexico’s and the wealthy’s gain.
Shutting the eight factories will cost three-plus billion dollars. General Motors has to borrow the money because it has spent $13.9 billion in cash on share buybacks over the past four years while earning record profits now and then. Despite the buybacks, the price of GM shares has fallen quite a bit.
GM’s share price was over $47 in October 2017. Then the share price began to fall in spite of the billions of dollars of share buybacks with the Trump tax cuts, which should have jacked up its share price since buying $13.9 billion worth of GM shares took quite a bit of them off the market. Yet the price continued to plummet until barely above $30 in October 2018.
Notice GM did not use the billions of dollars it saved with the Trump tax cuts to purchase new plant and equipment or to upgrade its US facilities, although it is creating new jobs in Mexico and China with the tax cuts. Instead, the tax money went to prop up its share price, but to no avail. In the end, in order to attract rich investors into buying GM shares, the automaker had to lay off thousands of employees and export jobs to Mexico. The Trump tax cuts, which were focused on corporations and the rich, quite naturally, as expected, were middle-class job killers.
Since GM announced its reductions of employees, its share price has gone up to 37.95 as of November 30th, 2018. The rich are getting richer by producing nothing since the old wages and benefits earned by those GM employees who worked for a living and are now out of jobs are going straight into the pockets of the affluent via higher share prices, rising dividends, and surging corporate earnings.
That is not what the corporate news media wants you to know.