GM Poised to Join Hyundai-Kia in Unveiling U.S. Investment Plan

  • Top U.S. carmaker faced pressure to follow Ford, Fiat Chrysler
  • Trump threatening Mexico-built cars, praising U.S. hiring

General Motors Co. is set to announce a $1 billion U.S. investment plan, joining Hyundai Motor Co. and Kia Motors Corp. among the latest automakers to outline their spending amid pressure from President-elect Donald Trump to create jobs.

The largest U.S. automaker plans to say on Tuesday it will invest in U.S. plants over several years, and expects to add or retain 1,000 workers at several existing facilities, according to a person familiar with the matter. The announcement, which is being accelerated, is related to building products that were in the works and approved before Trump won the election in November, said the person, who asked not to be identified because the matter is private.

Earlier Tuesday, South Korea’s two largest automakers said they will increase investment in the U.S. over the next five years and consider building a new plant in the country. Trump praised Ford Motor Co. and Fiat Chrysler Automobiles NV last week for plans to spend on U.S. factories after Trump threatened for months to slap Mexico-built vehicles with a 35 percent import tax. Carmakers are eager to cooperate with the incoming administration as they prepare to ask for favors including weaker fuel economy rules and lower corporate taxes.

“This is the normal course of business,” Maryann Keller, an independent auto industry consultant in Stamford, Connecticut, said of GM. “All they’re doing is announcing investments that they would have made anyway.”

The auto industry isn’t alone. Wal-Mart Stores Inc. will create about 10,000 retail jobs, according to a statement Tuesday from by the nation’s largest private employer.

Read more: Trump tariffs probably won’t stop job flight

Trump’s Call-out

Less than two minutes into his first formal press conference since the election, Trump highlighted Ford’s decision to cancel a $1.6 billion factory in Mexico and expand an existing plant in Michigan. Fiat Chrysler committed $1 billion toward making three new Jeeps in the U.S. and enabling a Michigan facility to manufacture a Ram pickup now produced in Mexico.

“I hope that General Motors will be following and I think they will be,” Trump said Wednesday at Trump Tower in Manhattan. “I think a lot of people will be following. I think a lot of industries are going to be coming back.”

GM budgets about $9 billion a year toward capital expenditures, including for new models and factory upgrades. The U.S. is no longer the biggest market in the world for the Detroit-based company -- that title goes to China, were it plans to introduce 18 new or refreshed vehicles this year. The automaker announced at least $2.9 billion in U.S. investment for future production of engines and autos in 2016.

Trump targeted GM earlier this month for importing a small number of Chevrolet Cruze hatchback models from Mexico to the U.S. The company has made separate recent announcements that it would permanently cut 3,300 jobs at three passenger-car plants and temporarily slow production at five factories in states including Michigan and Ohio, due to slack demand.

Mexico Plans

GM also continues to invest in Mexico. In late 2014, the company said it would spend $5 billion on new plants in the country by 2018, creating 5,600 jobs. Facilities making the Chevrolet Equinox and GMC Terrain, shown last week at the North American International Auto Show in Detroit, account for about $1 billion of those outlays.

The auto industry has been in Trump’s cross hairs. He has threatened Japan’s Toyota Motor Corp. and BMW AG in Germany with tariffs on their Mexico-made cars. BMW sees “no reason” to change plans, Peter Schwarzenbauer, who heads the automaker’s Mini and Rolls-Royce brands and its car-sharing business, told reporters on the sidelines of a conference in Munich.

Hyundai and its affiliate Kia said on Tuesday they plan to invest $3.1 billion in the U.S. over the next five years, compared with the $2.1 billion they spent in the five years through 2016. The South Korean group may produce Hyundai Motor’s upscale Genesis vehicles and a U.S.-specific SUV in the country, said Hyundai Motor President Chung Jin-haeng, who also oversees strategic planning for Kia.

Trump Boost

“We expect a boost in the U.S. economy and increased demand for various models as President-elect Trump follows through on his promise to create 1 million jobs in five years,” Chung said. “We will actively consider introducing new models that have increasing demand and profits.”

Hyundai has been considering expanding its plant in Montgomery, Alabama, which produces the Sonata and Elantra sedans and Santa Fe crossover. The factory is running at its top capacity of 370,000 cars a year. Kia’s factory in West Point, Georgia is also at full tilt, producing 360,000 units of the Optima sedan and Sorento SUV a year.

Hyundai and Kia have no additional plans to invest in Mexico and won’t transfer production or jobs from the U.S. to Mexico, according to a Hyundai spokesman. Kia opened a new $3 billion, 200,000 unit-a-year production line in Mexico two months before the U.S. presidential election. The company plans to increase capacity there to 300,000 units this year and to 400,000 vehicles by the end of 2018.

“When automakers such as Toyota announced their new strategies in response to the so-called Trump risk, the industry was nervous and asked ‘Who’s next?’,” said Kim Jin-woo, an analyst at Korea Investment & Securities Co. in Seoul. “This is positive news that came at the right time as the automakers were facing capacity constraints in the U.S.”

Before it's here, it's on the Bloomberg Terminal.
LEARN MORE