GM dodges tariffs with $5 billion production shift to US from Mexico

DETROIT – General Motors (GM) plans to invest US$4 billion (S$5 billion) in its US plants over the next two years to boost output of some of its top-selling petrol-powered vehicles as the company works to manage President Donald Trump’s tariffs. 

The move will expand finished vehicle manufacturing at factories in the US states of Michigan, Kansas and Tennessee, GM said on June 10 in a statement.

The auto giant will shift production of several top-selling models, including its very profitable Chevrolet Silverado and GMC Sierra pick-up trucks and the Chevrolet Equinox sport utility vehicle, to factories in the US from Mexico.

GM plans to add between 3,000 and 4,000 US jobs when all production is in place, a spokesman said.

Taken together, the investments will allow GM to produce more than two million vehicles in the US each year.

They will also reduce the company’s reliance on its factories in Mexico, according to a person familiar with the matter.

GM will continue making vehicles affected by the announcement in Mexico, but at lower volumes, the person said. 

The shift marks one of the biggest pivots yet by an automaker in response to Mr Trump’s tariffs that have upended the economics of automobile manufacturing.

It is also a recognition by chief executive Mary Barra that Mr Trump’s trade war is not a passing phase. 

Since Mr Trump’s first term in office, he has railed against companies for making cars in Mexico only to be imported for sale in the US.

GM in 2024 was the largest importer of finished vehicles into the US, and it is seeking to mitigate an estimated US$5 billion exposure to Mr Trump’s tariffs. 

GM has previously said that it expects to offset about a third of its tariff exposure.

The latest moves will help GM reduce even more of those costs, a spokesman said. 

For GM, it is a step away from the company’s decades-long push to increase output in Mexico, where it accelerated sourcing of parts and vehicles in the 1980s in search of lower wages and a way around growing labour and retiree costs in the US.

Ms Barra has moved to build a good relationship with Mr Trump after taking heat from the President for closing a former plant in Lordstown, Ohio, during his first term.

She has worked with Mr Trump on tariffs and even defended them in remarks at a Wall Street Journal event in late May, saying they could help GM protect its turf from foreign automakers.

Since Mr Trump imposed 25 per cent tariffs on imported vehicles and parts, Ms Barra has had multiple meetings with the President and became convinced that levies on Mexican-made vehicles were not going away, said people familiar with the matter.

GM executives began working on different plans to manage the higher costs on vehicles made in those plants, one of the people said. BLOOMBERG