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Big Business Gets Hip To Trump
With all of the jobs I am bringing back into the U.S. (even before taking office), with all of the new auto plants coming back into our.....
Country and with the massive cost reductions I have negotiated on military purchases and more, I believe the people are seeing "big stuff."
Thank you to General Motors and Walmart for starting the big jobs push back into the U.S.!
I applaud the way President-elect Donald Trump has employed Twitter and social media to create a new omnipotent bully-pulpit. It has yielded results; while I prefer it to shame businesses and bad policies rather than fights with individuals; I am beginning to wonder if big business is getting hip by playing the public relations game instead of making serious business adjustments.
Let’s take the news from General Motors (GM). The company’s headline spoke of a $1.0 billion investment and the creation of 7,000 jobs. As I read through the press release, the real job creation number was 1,500. Moreover, the company admitted to investing $2.9 billion in 2016 and $21.0 billion since 2009.
As for jobs, GM says it will bring back 450 jobs from Mexico to produce axles for next-generation full-size pickup trucks. However, the fact is that 19,000 of the 25,000 jobs added from 2013 to 2016 were engineering, while only 6,000 were manufacturing.
By the way, General Motors (GM) also announced (quietly) that they are introducing 18 new models in China, which require some serious investments.
Hyundai Motor Co. (KRX) is increasing its investment in the United States by 50% to $3.5 billion to upgrade factors and boost self-driving cars. These investments will largely focus on artificial intelligence and other “future” technologies. Management says it will still break ground on its Mexico factory later this year.
Then there’s Wal-Mart (WMT), promising 10,000 new retail jobs this year, which isn’t a lot for the largest private employer in the United States.
I am glad companies doing business in America understand the importance of manufacturing here beyond Economics 101. Goodwill isn’t just a balance sheet entry; on Main Street, it informs opinions that result in sales –or not.
By the same token, I don’t want to see business as usual disguised through press releases and headlines that enunciate decisions made years ago, or decisions that aren’t really impressive in the proper context.
Also, I am not a fan of tariffs in general, but I agree that we are in some awful trade deals. I would like to see them adjusted, or create fresh deals very quickly. Currently, cars imported to the United States from the European Union (EU) pay a 2.5% tariff, while those exported from the U.S. to the EU have to endure a 10% tariff.
Let’s fix this ASAP.
Meanwhile, we must make the business backdrop friendlier for domestic and foreign businesses. I don’t see America leveling German automakers with a 35% tariff. Heck, foreign automakers have been a blessing for America, including German luxury brands.
Seven of the top 15 auto factories in America are foreign brands:
Border Adjustment Tax (BAT)
Donald Trump’s statement that the GOP border tax is too complicated was music to the ears of many, including retailers. Of course, the GOP is also looking to fill the void of revenue from lower corporate taxes as well as counter an unleveled playing field. Be that as it may, it would appear the Border Adjustment Tax (BAT) is DOA, so it’s back to possible tariffs and other barriers.
I am cool with the stick, and I am even okay if we pressure Mexico and Canada, but I think there will be early concessions that make tough punitive actions unnecessary.
The presidential campaign focused on trade deals and currency manipulation, mostly with Mexico and China, so it’s kind of surprising to see Germany in the crosshairs. On the one hand, it’s refreshing; on the other hand, it is worrisome. I reiterate that America could win a trade war, but it would be a pyrrhic victory at best.
The Dow Jones Transportation Index (DJT) has enjoyed an amazing 52 weeks –up more than 36% and serving as a foundation for the broad-based rally. Recently, however, the rally has hit an air pocket (couldn’t resist), and it should continue to be challenged after earnings from two components.
CSX Corporation (CSX) beat on the top line and missed on earnings, sending its shares fractionally lower.
United Continental Holdings (UAL) beat on revenue and earnings, which is great news, but I am not sure it is enough to pull the entire index out of a slight nosedive. Much will be made of the company’s cautious guidance.
I would like to see the index hold up above 9,000, but it would be the end of the world if there were a greater retracement.
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