Analyst: Outsourcing American Jobs Responsible for GM Layoffs, Not Tariffs

The multinational corporate business model of outsourcing and offshoring Americans’ jobs overseas to cheap labor foreign countries is responsible for General Motors’ (GM) recently announced mass layoffs of American workers, a trade analyst says.

Coalition for a Prosperous America Research Director Jeff Ferry details in new analysis that the recent announcement by GM to lay off 14,700 workers in North America — including 3,300 American factory workers — is the end result of the corporation’s outsourcing business model.

In 2019, GM expects to stop production at four American plants, including Detroit-Hamtramck and Warren Transmission in Michigan, Lordstown Assembly in Ohio, and Baltimore Operations in Maryland. This comes after GM laid off about 1,500 American workers in Lordstown earlier this year while their Mexico production remained unaffected.

Ferry’s research reveals that GM is one of the “most aggressive” automakers in terms of outsourcing their U.S. production to Mexico.

“GM’s Mexican production is up by 300,000 units over the 2008 level,” Ferry notes.

“… GM’s US vehicle production fell by some 330,000 units in 2017, while its production in Mexico rose by 126,000 last year,” Ferry writes. “Ford is now the number one producer of vehicles in the US.”

“With the closures announced last month, it’s likely that GM’s US production will continue to fall, while its Mexican production rises,” Ferry writes. “If GM wasn’t loading up its Mexican plants, but instead shifted some of that production to the US facilities it’s planning to close, those facilities would be running at much higher levels of utilization and would probably be profitable.”

Offshoring production out of the U.S. to Mexico has proven cheaper for GM executives, as American workers earn $30 an hour while Mexican workers earn about $3 an hour, a 90 percent cut to wages that widens the corporation’s profit margins.

Citing GM’s $2.8 billion in profit in the third quarter of 2018 in North America, Ferry says GM’s layoffs in the U.S. and Canada are driven by outsourcing, not President Trump’s tariffs on imported steel and aluminum, and not poor profits.

“Although the tariffs add a few hundred million dollars to GM’s costs, that additional cost is completely overshadowed by the additional revenue and profit flowing from better-than-expected truck sales,” Ferry writes.

Ferry’s solution to continuing offshoring of American jobs to Mexico is imposing tariffs on the $180 billion worth of imported vehicles in 2017, citing the effectiveness of the 25 percent on imported light-duty pickup trucks.

“GM North America’s revenue this year is likely to come in at around $110 billion, so if it could capture an additional $10 billion in revenue from the importers hit by tariffs, it would make a significant difference to its capacity utilization, profitability, and the viability of its US footprint,” Ferry notes.