Musk, GM weigh fate of Ohio plant Trump wants saved

[December 21, 2018]  By Ben Klayman

DETROIT (Reuters) - Tesla Inc <TSLA.O> Chief Executive Elon Musk raised hopes again on Thursday that he could ride to the rescue of a threatened General Motors Co <GM.N> car plant at the center of a political storm about auto jobs, and GM replied, saying the Ohio factory's fate depends on union talks next year.

Musk suggested in a Twitter exchange with outgoing Ohio Governor John Kasich that he would consider acquiring GM's Lordstown small-car factory in Warren, Ohio, which GM has signaled it could close next year. The decision has prompted bipartisan anger in Washington, led by U.S. President Donald Trump.

Musk had dropped a hint in an interview with the CBS TV program "60 Minutes" on Dec. 9 that he might be interested in buying one of the three North American vehicle assembly plans GM has said have no work allocated after next year.

On Monday, Kasich tweeted at Musk, "Hey @ElonMusk. Call me. There are no better workers than Ohio workers. And Lordstown is ready for you." Musk responded on Thursday, "Thanks, will consider next year."

GM, however, owns the factory, and in a statement following the Musk tweet, GM spokesman Patrick Morrissey said: "GM has said the plant is unallocated and the next steps are a matter of UAW-GM negotiations."

GM and the United Auto Workers will negotiate new master contracts for the automaker's U.S. operations next year, with a resolution likely in the fall.

The Lordstown assembly plant, which builds GM's slow-selling Chevrolet Cruze compact sedan, is one of five plants in North America GM has marked for possible closure.

Trump has put pressure on GM to find a new vehicle for the Lordstown plant, threatening to kill a $7,500 federal tax credit program for electric vehicles that is beneficial to GM. That program has also benefited Tesla, and both automakers have lobbied Congress for months to lift the cap on electric vehicles eligible for the full $7,500 tax credit from the present level of 200,000 vehicles.

HIGH STAKES

Analysts on Thursday tried to sort out the pros and cons of a deal that has not happened.

For Trump, the stakes are clear. Ohio is a battleground state the president won in 2016 and needs to win again to be re-elected in 2020. Trump said during a July 2017 visit to nearby Youngstown that jobs were coming back to the region. "Don't move," he told local residents. "Don't sell your house."

For GM, selling Lordstown to Tesla could help "reduce costs, improve sentiment and de-escalate political pressure," Morgan Stanley analyst Adam Jonas said in a research note on Thursday.

A view of the entrance to the West Plant at the General Motors Lordstown Complex, assembly plant in Warren, Ohio, U.S., November 26, 2018. REUTERS/Alan Freed/File Photo

GM, however, plans to compete more aggressively with Tesla by launching a fleet of electric vehicles over the next several years. Enabling Tesla's expansion could undermine its own electric-vehicle strategy.

Tesla's sole assembly plant in Fremont, California, used to be a GM factory. The electric vehicle maker acquired the plant in 2010 for $42 million after GM and then-partner Toyota Motor Corp <7203.T> abandoned production there. Tesla has begun building a plant in China.

Ohio’s incoming governor, Mike DeWine, plans to meet with senior GM executives next month at the Detroit auto show to discuss the fate of the Lordstown plant, but GM officials have told Congress it is extremely unlikely the company will add a new vehicle there.

If GM did reverse course and decide to retool the plant, it could take at least three years to prepare it for production, including potentially replacing the paint shop, GM told lawmakers.

The United Auto Workers reiterated on Thursday that the union "will leave no stone unturned contractually, legally and through bargaining to keep the GM plant open.”

Musk has had a tense relationship with the UAW, which is seeking to represent workers at Tesla's Fremont plant. The union in May filed a complaint accusing Musk of illegally threatening to take away benefits from workers who join the union.

Musk previously accused the UAW of driving GM and Chrysler <FCHA.MI> <FCAU.N> to bankruptcy and losing "200,000+ jobs for people they were supposed to protect," apparently referring to effects of the crisis in the U.S. auto industry in 2008-2010. UAW officials called Musk's comments "ridiculous"

GM shares were down 2.7 percent at $33.97 and Tesla shares were down 5.8 percent at $313.76 on Thursday afternoon.

(Reporting by Ben Klayman in Detroit; additional reporting by David Shepardson in Washington; Editing by Joe White and Matthew Lewis)

[© 2018 Thomson Reuters. All rights reserved.]

Copyright 2018 Reuters. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.  Thompson Reuters is solely responsible for this content.