On November 26, General Motors (GM), America’s largest automaker, made an important announcement. The announcement was labeled as “General Motors Accelerates Transformation.” The company plans to close three of its assembly plants and two of its propulsion plants. General Motors also said that it would cut its “salaried and salaried contract staff” by 15%. The company called these measures “proactive steps to improve overall business performance.”
General Motors stock reacted
After the announcement, General Motors stock rose and settled with 4.8% gains on November 26. The stock rally was also supported by the broader market recovery on November 26. The S&P 500 Index rose 1.6% on the same day. The S&P 500 Index fell 3.8% in the week ending November 23.
On November 27, in a series of tweets, President Trump criticized General Motors “for closing plants in Ohio, Michigan, and Maryland.” President Trump threatened to cut all of General Motors’ subsidies including subsidies given to car buyers when they purchase General Motors’ electric vehicles.
Before President Trump’s tweet on November 27, General Motors stock was already trading in the negative territory for the session. President Trump’s tweet pushed the stock a little further down. The stock settled with 2.6% losses on November 27.
General Motors stock was still trading in the green zone sequentially. As of November 27, the stock has gained 9.0% sequentially compared to 8.0% seen in the S&P 500 Index. Other auto stocks (XLY) including Ford (F), Fiat Chrysler (FCAU), and Tesla (TSLA) have witnessed changes of 0.3%, -4.6%, and 29.9%, respectively, in the fourth quarter.
Next, we’ll discuss why President Trump’s criticism of General Motors’ recent move was expected.