General Motors' shares fall after Trump threatens to cut its subsidies as retaliation for layoffs

Key Points
  • President Donald Trump says he will consider pulling General Motors' subsidies after the company announced plans to slash production at several facilities and lay off more than 14,000 people.
  • The president has threatened companies that shut down American operations or consider moving production overseas after he promised to revive U.S. manufacturing.
  • It is unclear exactly how much GM benefits from federal government subsidies, but it plans to phase out production of one electric vehicle model, the Chevrolet Volt, which qualifies for a tax credit for buyers.
Trump tweets he's looking at cutting all GM subsidies

President Donald Trump will consider cutting all subsidies to General Motors after the company announced plans to slash production at several American plants, he said Tuesday.

"We are now looking at cutting all @GM subsidies, including ... for electric cars," the president wrote in a pair of tweets.

Trump tweet

The automaker's shares fell following the tweets and were down more than 3 percent on Tuesday afternoon, on track for their worst day in a month. In a statement Tuesday, GM said it is "committed to maintaining a strong manufacturing presence in the U.S." and noted that "many of the U.S. workers impacted by [plant closures] will have the opportunity to shift to other GM plants."

"We appreciate the actions this administration has taken on behalf of industry to improve the overall competitiveness of U.S. manufacturing," the company said, without directly addressing Trump's threat to revoke subsidies.

The president escalated his public threats against GM as he pushes the company to keep the facilities in Ohio, Michigan and Maryland open. Trump has repeatedly pressured American companies who consider shutting down facilities or moving operations overseas after he pledged to revive U.S. manufacturing.

"They better damn well open a new plant [in Ohio] very quickly," Trump told The Wall Street Journal about GM's decision on Monday. He said he told the company that "you're playing around with the wrong person."

General Motors CEO Mary Barra
Getty Images

On Tuesday, White House press secretary Sarah Huckabee Sanders told reporters that she does not know about a specific timeline for pulling subsidies and stressed that Trump is looking into it.

It was not immediately clear exactly how much subsidies help GM's business, or how much power Trump has to revoke the company's tax breaks. Electric vehicle buyers currently qualify for a tax credit of up to $7,500, which is designed to encourage sales.

That credit starts to phase out when a manufacturer sells 200,000 electric vehicles in the United States. GM expects to hit that cap by the end of 2018, meaning its electric vehicles will no longer qualify for the credit in a little over a year. Still, the issue is not settled: Republican Sen. Dean Heller of Nevada has proposed a bill to lift the cap on the number of vehicles eligible for the credit, but phase out the break entirely in 2022.

GM has already started to move away from one electric vehicle model. As part of its plans announced Monday, the automaker said it would phase out production of the plug-in hybrid Chevrolet Volt.

Assembly of the model took place at a Detroit factory, where as many as 1,500 people could lose their jobs during the restructuring. GM expects to stop production of the Volt at the beginning of March.

The company plans to cut more than 14,000 factory and white-collar jobs in all as it scales back production at the plants in the three states and Canada. That figure could change depending on whether some workers get moved to other GM facilities.

Hard to see how Trump could legally remove GM's subsidies: Albertine

Politicians in the states slammed the automaker's move. Trump took particular issue with the closure of a plant in Lordstown, Ohio, an area he pledged to revive last year that sits in a key political swing state.

Trump spoke to GM CEO Mary Barra on Sunday. The next day, the executive met with Trump's top economic advisor Larry Kudlow. The National Economic Council director told reporters Tuesday that he told Barra about possible "additional announcements" related to GM and said the administration would "be looking at certain subsidies."

In his tweet Tuesday threatening to pull subsidies, Trump said he was "very disappointed" with GM and Barra. He cited the U.S. bailout of major automakers after the 2008 financial crisis.

"The U.S. saved General Motors, and this is the THANKS we get!" he tweeted.

The president added: "General Motors made a big China bet years ago when they built plants there (and in Mexico) - don't think that bet is going to pay off. I am here to protect America's Workers!"

Trump tweet

— CNBC's Tom DiChristopher contributed to this report.