The Detroit Free Press reports on recent comments from GM CFO Paul Jacobson at the Deutsche Bank Global Auto Industry Conference. He gave an update on GM’s strategy for mitigating the costs associated with new tariffs implemented by the Trump administration, which he believes the automaker can offset by about 30 percent. Previously, GM ambitiously expected to mitigate as much as half of those costs.
The strategy is threefold: increase domestic manufacturing for both vehicles and parts, reduce costs by as much as $2 billion, and stick to existing pricing strategies.
“I don’t think what the administration is doing (enacting tariffs) is trying to pick winners and losers, necessarily,” Jacobson said at the conference. “I think there’s a clear policy agenda.”
Jacobson went on to talk about GM’s recent announcement to invest $4 billion into three U.S. manufacturing facilities over the next two years. “Four billion dollars is a lot of money, but I think we’ve been able to spread that in ways that are capitalizing on the next generation of vehicles coming in, to do it efficiently. Not building walls that we don’t need to build where we can still plan stuff.”
The White House specifically cited the GM investment as a win for the Trump administration’s trade policy. “No president has taken a stronger interest in reviving America’s once-great auto industry than President Trump, and GM’s investment announcement builds on trillions of dollars in other historic investment commitments to Make in America,” White House spokesman Kush Desai said in a statement.
As for costs and pricing, GM intends to use careful inventory management and consistent pricing to maintain its revenues in the face of tariff costs. Unlike Detroit rivals Ford and Stellantis, GM never advertised tariff-free pricing deals or offered specific discounts as a reaction to tariff feats. “I wouldn’t say that we’ve been focused on pricing; we’ve been focused on discipline,” Jacobson said. “Pricing is an outcome of that.”
“We would take inventories way up, we’d find that demand slowed, and we’d have to discount steeply to be able to do that,” Jacobson said. “That leads to a significant decline, a rapid decline, in cashflows.” Avoiding such overreaction is another way GM plans to manage costs and inventories.
“I think the question out of earnings is going to be, how far does it come down?” Jacobson said.
Comment
Meh. Not a great answer.