Market Overview

Trump Threatens To Cut GM's Subsidies

Trump Threatens To Cut GM's Subsidies

General Motors Company (NYSE: GM) stock is down 3 percent Tuesday afternoon after U.S. President Donald Trump threatened to retaliate against the company after it announced it would be closing U.S. plants as part of a large corporate restructuring.

What Happened

GM announced Monday it plans to close five U.S. plants, lay off 14,000 workers and discontinue six vehicle models as part of a new long-term restructuring plan aimed at streamlining the company’s business. The market reacted favorably to the plan, which will reportedly help increase GM’s free cash flow by roughly $6 billion by 2020.

Trump on Tuesday threatened to retaliate against GM for its decision to close U.S. plants.

Why It’s Important

GM’s stock traded higher by nearly 5 percent Monday after its restructuring announcement reassured investors the company is aggressively taking on a softening auto market and setting itself up for long-term success by managing costs.

Wall Street analysts uniformly praised the restructuring plan as the right long-term move for GM investors.

Trump has singled out individual companies on Twitter before without following through with any action, but National Economic Council chairman Larry Kudlow said this time investors should expect further follow-ups from the White House. Kudlow specifically said Trump has been considering withdrawing subsidies for electric cars, a move that could potentially negatively impact Ford Motor Company (NYSE: F) and Tesla, Inc (NYSE: TSLA) as well.

GM included the removal of EV subsidies as a risk factor for investors in its most recent 10-K filing.

What’s Next

Auto investors will be keeping a close eye on headlines out of Washington this week. In addition to a potential update on Trump’s GM threats, international trade ward developments from the G20 summit could have a significant impact on auto stocks.

GM's stock traded around $36.46 per share at time of publication.

Related Links:

Wall Street Reacts Favorably To GM Layoffs, Plant Closures

Oil, Stocks Hang In Balance Ahead Of G20 Meeting

General Motors CEO Mary Barra in June 2017. Photo by Dustin Blitchok.


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