The legacy news media, let alone the local Detroit publications, don’t consider this newsworthy, but I do: GM plans to build its electric Cadillac Optiq crossover SUV at its state-of-the-art Ramos Arizpe EV plant in Mexico. A Mexican trade publication confirmed the news, and GM Authority, an independent website that covers the automaker like a glove, picked up the story. Allow me to explain why this development underscores that regardless of whether Joe Biden or Donald Trump prevails in November, America’s one percent will continue getting richer and the poor will become even poorer.
The Optiq will be the third electric vehicle GM manufacturers in Mexico and sells in the U.S. With an estimated starting price of $54,000, the EV likely will be eligible for lucrative tax rebates under Biden’s signature Inflation Reduction Act. GM’s Mexican-made electric Blazer and EV Equinox vehicles also are eligible for lucrative tax rebates.
This shouldn’t come as a big surprise. GM CEO Mary Barra, who owes her job and the more than $200 million she’s been paid since taking over GM more than a decade ago to the benevolence of U.S. taxpayers, in 2021 invested more than $1 billion in the Ramos Arizpe plant to prepare it for electric vehicles. Barra a year ago last January committed that the Ramos Arizpe plant would only manufacture electric vehicles, which was significant because at the time she was still talking up a storm about how EVs were GM’s future and that by the end of 2025 she’d be selling more of them than Elon Musk’s Tesla.
America’s legacy media ignored the story, but Mexico’s economy minister appreciated the significance.
GM snookered the U.S. media, which continues to fawn over Barra despite failing so miserably achieving her goals and objectives that an investor advisory firm recommended that shareholders not approve the $28 million compensation she awarded herself for 2023. (Barra is chair of GM’s board and ultimately controls it). GM confirmed that it would manufacture the Optiq in Mexico at the end of a presentation event in the interior of the country and as part of a statement that GM Mexico sent only to select Mexican media.
There’s a wrinkle to GM’s Cadillac Optiq announcement that every American must appreciate. The Optiq vehicles manufactured at the Mexican plant will be exported to a dozen international markets, including Canada, the Middle East, Europe, and some countries in Asia. It also will be sold in Mexico, where GM under Barra became that country’s biggest vehicle manufacturer.
The Optiq will also be sold in China, but GM will manufacture the vehicle at its Shanghai plant, which serves the Chinese market exclusively.
Why wouldn’t GM simply export the Mexican-made Optiq to China much like it imports its Buick Envision SUV from China for the U.S. market and Ford imports the China-made Lincoln Nautilus SUV for its U.S. customers?
That’s because China’s communist government imposes hefty tariffs on foreign made vehicles sold in its domestic market. Underscoring the wicked smarts of China’s government leaders, they allowed Elon Musk special privileges to build and sell Teslas in China without partnering with a domestic company as is typically required, providing Tesla used only local suppliers and helped China develop its EV expertise.
China, where Tesla is building a second massive plant, accounts for more than half of Tesla’s global sales. Without China, Tesla’s survival possibly wouldn’t have been assured. Normally xenophobic China wasn’t worried about Elon Musk’s American loyalty. The Wall Street Journal reported that Xi Jinping, China’s leader, regards Musk as “a technology utopian with no political allegiance to any country.” It’s a great irony that a communist government was responsible for making Elon Musk one of the world’s richest persons.
One doesn’t need Barra’s Stanford MBA to appreciate why she wants to build her EVs in Mexico. GM pays its Mexican workers about $4 an hour, compared with the more than $40 an hour GM is required to pay its U.S. factory workers under the terms of the “historic” contract the UAW negotiated last fall. In addition to benefitting from the lower wages, Barra’s Mexican-made EVs qualify for the same U.S. taxpayer rebates she’d get if she built them in America.
Ford proudly builds its electric Mustang in Mexico, which for a time was eligible for lucrative tax rebates. Elon Musk also planned to build a giant Gigafactory in Mexico to build his promised low cost $25,000 EV, but development has been slowed, as Musk said he doesn’t want to go “full tilt” in Mexico given America’s uncertain economy. In a nod to his loyalty to China, Musk earlier this year invited Tesla’s Chinese suppliers to Mexico and encouraged them to set up shop in that country.
Even if Tesla delays its Mexico expansion, China’s leading EV manufacturers are planning to build factories in Mexico. Under the terms of Biden’s Inflation Reduction Act, they likely couldn’t export the EVs to the U.S. and qualify for lucrative taxpayer rebates because the bill imposes strict limits on the amount of battery materials coming from China or companies with ties to the communist country.
Nevertheless, even without eligibility for tax breaks, China’s auto manufacturers could sell their Mexican-made EVs at a lower cost in the U.S. than GM and Ford because they have considerably more expertise building them and were utilizing AI in their manufacturing processes long before the software was popularized. Taking a page from Donald Trump’s playbook, the Biden Administration recently increased the tariff rate on Chinese-made EVs to 100% from 25%, thereby eroding their cost advantage in the U.S.
Biden notably attacked Donald Trump for advocating tariffs in their 2020 matchup.
“A 100% tariff rate on EVs will protect American manufacturers from China’s unfair trade practices,” the White House said in a news release. “This action advances President Biden’s vision of the auto industry will be made in America by American workers.”
That’s simply not true, as evidenced by GM expanding its Mexican operations, as Ford and Stellantis also are expected to do. Biden slimed China’s “unfair trade practices” because the country’s EV manufacturers have received considerable subsidies and incentives. While perhaps not to the same degree, GM’s and Ford’s EV investments and sales in the U.S. are also heavily subsidized by U.S. taxpayers.
Practically speaking, Biden’s tariffs protect the managements of GM and Ford from their failures to notice China’s mounting EV supremacy and potentially making dim sum out of Barra and Ford CEO Jim Farley.
I’m not alone in this opinion.
During a presentation to investors this week in suburban Detroit, Stellantis CEO Carlos Tavares criticized Biden’s tariffs, saying they were “correcting a lack of competitiveness,” which he suggested will come back to bite some “naive” automakers over the long term.
“We go racing, we don’t expect anyone to protect us,” said Tavares, an avid race car driver who has participated in more than 500 competitions. Tavares said it’s smarter to “expose yourself to the harshest possible competition on the planet.”
Tavares is a considerably more credible and strategic planner than Barra and Farley. For years, he was pillared in the U.S. media for warning that aggressive government EV mandates weren’t practical and advocating a go-slower approach. That cautious and thoughtful approach proved correct. The Biden Administration recently relaxed its vehicle environmental requirements and Stellantis is capitalizing on Tavares’ wisdom.
In Europe, where Stellantis is based, the company is making great strides selling EVs, including France, where the company’s EV sales last year rose 56% and captured a 38% market share, and Germany, where the company’s EV sales rose 22%. Germany is the world’s No. 2 producer of EVs.
While GM and Ford have scaled back their EV spending and target commitments, Stellantis has remained firm on its plan to sell 100% electric cars in Europe by the end of the decade, and 50% in the U.S. The company just announced plans to build an electric Jeep Renegade for about $25,000. Although Jeep is owned by Amsterdam-based Stellantis, it’s been ranked as America’s most patriotic brand for 23 consecutive years.
Elon Musk initially supported Biden’s tariffs, saying without them China would “demolish most other car companies in the world.” A few weeks ago, Musk did an about-face and said he no longer wanted protective tariffs.
“Tesla competes quite well in the market in China with no tariffs and no deferential support. I’m in favor of no tariffs,” Musk told a Paris technology conference.
My cynical view is that Musk’s Chinese handlers got to him. Tesla is so in bed with China that the company years ago asked the country’s government censors to silence critics who were complaining about the alleged poor quality of Tesla’s vehicles. Underscoring how tight a leash China has on the professed “free speech absolutist,” the communist government called Tesla “arrogant” and forced the company to publicly apologize for its treatment of a customer.
Musk has shown nothing but disdain for Biden and U.S. regulators, deriding the president as a “damp sock puppet.”
At the end of the day, Biden’s tariffs will force Americans to pay considerably more for EVs, while enriching Barra, Farley, and their managements because the protective measures spare them from having to continue to invest heavily in electric vehicles to better compete with China’s automakers.
GM this week announced plans to spend $6 billion buying back the company’s stock, on top of the $10 billion share buyback program the company announced last year. Buybacks boost the price of a company’s shares because they reduce the number outstanding, thereby immediately boosting the value of shares investors already hold. Barra will be among the major beneficiaries of the once illegal stock manipulation because a major portion of her compensation over the years were stock options.
Despite his feigned blue-collar persona and a supposed allegiance to unions, CEOs under Biden’s leadership have escalated their obscene compensations and widened the pay gap between themselves and their workers.
According to an Equilar analysis conducted for the AP, median compensation packages for chief executives who run companies in the S&P 500 rose nearly 13% last year. And roughly two dozen chief executives in the survey feasted on pay increases of 50% and more.
By comparison, the peons underneath them last year only received median pay increases of 5.2%, just above the rate of inflation. The median S&P 500 employee earned $81,467 in 2023.
In 2022, CEOs made roughly 185 times their typical worker; CEOs now make roughly 196 times their employees.
Trump, who proudly calls himself “tariff man,” said if he’s reelected he would impose a tariff of at least a 10% on all $3 trillion worth of US imports. According to a paper published by the Peterson Institute for International Economics, Trump’s tariffs would inflict “significant collateral damage on the US economy,” costing consumers at least $500 billion a year, or 1.8% of gross domestic product (GDP).
“(Trump’s proposed tariffs) are more likely to hurt than help the lower- and middle-income Americans they purport to benefit,” warned Kimberly Clausing and Mary Lovely, senior fellows at the Peterson Institute.
Recall that Trump’s MAGA initiative when he assumed the presidency was to significantly cut corporate taxes, which he said would result in America’s benevolent CEOs investing more in their businesses and paying their workers better wages.
“More than 70 percent of this [tax cut] will be returned to workers,” then press secretary Sarah Huckabee Sanders said.
That’s not what happened. Instead, companies used their windfalls to spend more than one trillion dollars buying back their stock and increasing their dividends to shareholders. As the wealthiest 10% of Americans own 93% of U.S. stocks, Trump’s tax cuts represented a diversion of corporate taxes to America’s one percent.
Those with long memories remember that Trump when he ran for office in 2016 promised to close the so-called carried interest “loophole” that benefits wealthy hedge fund managers and private equity executives and allows them to pay lower tax rates than their administrative assistants. That never happened, just like Biden’s promise to quadruple the excise taxes on share buybacks isn’t going to happen.
At the end of the day, Biden and Trump serve the same masters, the wealthiest one percent of Americans. While Biden delights in calling Trump “a convicted felon” and Trump maligns Biden as “Sleepy Joe,” it’s all just noise that diverts from the fact that regardless of who wins the 2024 presidential election, Americans will continue to suffer a decline in their standard of living and quality of life.
America’s wealthiest will continue enjoying the good life, with more money than they’ll ever know what to do with.