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General Motors (+4.76%) made a major announcement yesterday. 

"Staffing transformation": The automaker plans to cut its salaried workforce by as much as 15% (and its executive ranks by 25%). The cuts could total about 14,000 jobs. But remember, this "transformation" was set into motion last month, when GM offered buyout packages to about 18,000 salaried workers in North America. 

"Increasing capacity utilization": GM said it will stop production at five plants across the U.S. and Canada, and two more internationally, in 2019. (It's possible some could resume operations, pending the outcome of union negotiations.)

Politicians from President Trump to Canadian Prime Minister Justin Trudeau were extremely disappointed/angry with GM. Here's Rep. Tim Ryan (D-Ohio): "Today our generation is facing a new Black Monday in the Mahoning Valley."

"Optimizing product portfolio" and "Transforming product development": There are two auto industry trends GM wants to stay on top of...1) growing consumer preference for SUVs and crossovers and 2) disruption from technological innovation. 

So...it's 1) cutting a few slumping car models, including the Buick LaCrosse and the Chevy Impala, while 2) doubling resources allocated to electric and autonomous vehicle programs. But still axing the Chevrolet Volt?

What's the cost?

These moves are expected to increase automotive free cash flow by $6 billion by year-end 2020...and hit GM with a one-time charge of between $3 billion and $3.8 billion in Q4 2018 and Q1 2019. 

GM CEO Mary Barra said: 

  • "We are taking this action now while the company and the economy are strong to keep ahead of changing market conditions."
  • "This is about making sure GM is lean and agile to get in front and lead in autonomous and electric vehicles."

Viewed in the context of GM's bankruptcy last decade and President Trump's promise to keep manufacturing jobs in the U.S., the political fallout will be severe to say the least.

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 President Trump said he told GM it's "playing around with the wrong person."

Yesterday, Trump demonstrated what being that "wrong person" could mean.

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If it becomes reality (a huge "if"), Trump's threat to cut electric vehicle subsidies could spell trouble for GM. That's because, as of right now, consumers who buy fully electric vehicles (like GM's Chevy Bolt) are eligible for a federal tax credit of $7,500 toward the vehicle. But...that credit begins to phase out after an automaker sells 200,000 eligible electric cars.

Tesla already hit that 200,000 mark, and GM was less than 4,000 vehicles away from the cap as of Q3.

Both Tesla and GM have pressed lawmakers to raise the 200,000-car cap and allow for more tax credits, which incentivize prospective car buyers to go electric. Bills have been introduced in the House and Senate...but neither chamber has passed a measure.

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