General Motors (GM) has announced an additional USD1-billion investment in US operations as well as 7,000 US jobs, while the president of Hyundai Motor has confirmed his company's plans to invest USD3.1 billion in US manufacturing over the next five years, possibly including a new assembly plant.
IHS Markit perspective
- Significance: General Motors (GM) has released an overview of a planned USD1-billion investment in the United States, which will include shifting production of truck axles from Mexico to the United States for next-generation pickup trucks. Hyundai Motor's plans for USD3.1 billion in US investment were revealed by the company's president during a media session in South Korea on 17 January.
- Implications: Investment from both companies supports long-term product plans. The announcements come just ahead of the inauguration of a US president who has indicated that he will push for stricter tariffs on vehicles and products imported to the US.
- Outlook: Despite current uncertainty over the new US presidential administration, investment decisions are expected to continue to reflect the realities of the full operating environment, including consumer demand, regulations, and trends in the light-vehicle (LV) market, as well as taxation and trade policy. Neither announcement indicates a significant deviation of company strategy, although the timing of the public comments appears designed to address President-elect Donald Trump's border tariff comments.
A General Motors (GM) investment announcement on 17 January outlined rough plans to make an additional USD1 billion investment into US operations and in the near term to retain or create 7,000 US jobs. GM said that the investment would cover "multiple new, advanced technology, and component projects".
To get to the headline of retaining or creating 7,000 jobs, GM noted that 1,500 new and retained jobs would be tied to the new investments and that the details would be revealed over the course of the year. The company also confirmed that it would move production of the axles for its next-generation pickup trucks from Mexico to its operations in Michigan. GM said that move would create 450 US jobs. The company did not specify how many jobs, if any, would be lost in Mexico through the move. The remaining 5,000 new jobs are related to the engineering functions at GM's Warren Tech Center, as well as GM Financial and GM's activities in advanced technologies.
In the statement, CEO and chairwoman Mary Barra said, "We will continue our commitment to driving a more efficient business, as shown by our insourcing of more than 6,000 IT jobs that were formerly outside the United States, streamlining our engineering operations from seven to three, with the core engineering centre being in Warren [Michigan], and building our momentum at GM Financial and in advanced technologies."
The executive was also quoted by Automotive News as saying, "As the US manufacturing base increases its competitiveness, we are able to further increase our investment, resulting in more jobs for America and better results for our owners. The US is our home market and we are committed to growth that is good for our employees, dealers, and suppliers and supports our continued effort to drive shareholder value."
GM also said that it was encouraging suppliers to also improve efficiency, citing a strategy to create supplier parks adjacent to US manufacturing sites, as well as a commitment by an unnamed supplier to produce certain components for GM's next-generation full-size pickups in Michigan. GM said that this move would result in 100 jobs being shifted from Mexico to the US. GM also noted that it had created 25,000 jobs in the United States (19,000 in engineering and IT and 6,000 hourly manufacturing jobs) and cut more than 15,000 overseas. The company said that it had added nearly USD3 billion in annual wages and benefits to the US economy over the past four years.
Separately, the president of Hyundai Motor told media in South Korea that the company was planning to invest USD3.1 billion in the US over the next five years. The company has spent about USD2.1 billion over the last five years, according to Bloomberg. The report said that a new factory in the US that could produce Genesis vehicles and a US-specific utility vehicle was under consideration. President Chung Jin-haeng was quoted as saying, "We expect a boost in the US economy and increased demand for various models as president-elect Trump follows through on his promise to create 1 million jobs in five years. We will actively consider introducing new models that have increasing demand and profits …. The US market is strategically a very important market for us and success or failure there is a barometer of our success globally. Our interest in the US market is consistent regardless of the government of the day."
Outlook and implications
Despite current uncertainty over the new US presidential administration, investment decisions are expected to continue to reflect the realities of the full operating environment, including consumer demands, regulations, and trends in the light-vehicle (LV) market, as well as taxation and trade policy. Neither announcement indicates a significant deviation of company strategy, although the timing of the public comments on the plans appears designed to address President-elect Donald Trump's border tariff comments.
Hyundai has long been considering a US plant and its recent opening of a Kia plant in Mexico has ended its unofficial freeze on new assembly plants. GM has been heavily investing in the US since emerging from bankruptcy. Several of its US-assembled products are also due for renewal through 2019 – and new products drive investment in plant infrastructure.
GM's announcement seemed not to contain a notable shift in production plans, but the data supplied focused on the company's investment and its positive impact in recent years. Barra's comments also resembled those by Mark Fields on the cancellation of Ford's planned USD1.6-billion plant in Mexico in that both executives forecast that Trump's campaign promises to improve the corporate tax structure and reducing the cost of doing business in the US would influence investment decisions.
While GM has recently announced plans to reduce output in certain car plants in 2017 to fit current demand patterns the company has also revealed a variety of investments in the US.
Hyundai has long considered expanding its US production beyond the Kia plant in Georgia and the Hyundai plant in Alabama. These recent comments did not clarify when a decision might be made. The Kia plant in Mexico started production in 2016, after being announced in 2014. Kia also confirmed that it expects to export most of the volume from the Mexico plant.
Several other automakers have made investment announcements in recent weeks – most likely for similar reasons.
About this article
The above article is from IHS Automotive Same-Day Analysis of automotive news, events and trends, and is a deliverable of the World Markets Automotive Service. The service averages thirty stories per day and also provides competitor and country intelligence. Get a free trial.