Question

Recently, President Trump has made comments about potentially removing subsidies for GM. What specifically is he talking about and would this be a good deal for the American people?

Answer 1

When General Motors announced that it would idle five North American plants and eliminate thousands of jobs, it said the move would ease the burden of spending billions of dollars to develop the battery-powered vehicles of the future.

But the White House put a question mark over those plans on Tuesday when President Trump — irate over the cutbacks — threatened to punish G.M. by ending federal tax credits that have helped underwrite that automaker’s electric-vehicle fleet.

“Very disappointed with General Motors and their CEO, Mary Barra, for closing plants in Ohio, Michigan and Maryland,” Mr. Trump said in a Twitter post. “Nothing being closed in Mexico & China.”

What difference do the electric-vehicle credits make?

The federal government offers a $7,500 tax credit to buyers of battery-powered and plug-in hybrid vehicles, an incentive that many consumers have found attractive. The full credit, however, is available only on the first 200,000 electric vehicles an automaker sells. Once that threshold is reached, the credit falls to $3,750 for six months, then to $1,875 for an additional six months. Beyond that, there is no tax credit.

Tesla is the only carmaker to have sold more than 200,000 electric cars in the United States. At the end of this year, the tax credit on Tesla vehicles falls to $3,750.

G.M. says it has sold about 190,000 — mostly hybrid Volts, a model it said Monday it was discontinuing, and fully electric Bolts — and will pass 200,000 early next year.

There are proposals in Congress that would extend or expand the credit, but the Trump administration’s opposition could dim or kill those prospects.

“We’re going to be looking at certain subsidies regarding electric cars and others and whether they should apply or not,” Mr. Kudlow said Tuesday. “Can’t say anything final about that, but we are looking into it.”

Why did G.M. choose the plants it is shuttering?

Of the five factories that G.M. is mothballing, three are assembly plants: Lordstown, Ohio; Oshawa, Ontario; and the Detroit-Hamtramck plant in Michigan. All are almost certainly losing money, and make cars whose sales have plunged. As a result, the plants are operating well below capacity.

Are these plants closed for good?

Not necessarily. G.M. specifically announced that the plants were now “unassigned” — that is, they have not yet been assigned new vehicles to make after they stop production in 2019.

What do G.M.’s cutbacks say about the economy?

Not a lot. The halting of production at these three sites doesn’t mean G.M. is struggling. On the contrary, the company continues to report billions in profits, thanks to buoyant pickup and S.U.V. sales.

G.M. took this action because it is being squeezed. It is losing money on the small cars and sedans these plants make, and it needs to keep investing in new technologies. By idling the three assembly plants — the other two make transmissions — it hopes to use the savings to help fund its electric-vehicle and autonomous-driving ambitions.

That particular need to shift capital investment is not an issue in other sectors. And while the industry is the largest manufacturing sector, it makes up only about 4 percent of the nation’s gross domestic product.

A broader economic slowdown could certainly cause grief for automakers. While Ms. Barra said one factor in G.M.’s move was to “improve our downturn protection,” she also made a point of saying the automaker was acting “while the company and the economy are strong.” So a few idle auto plants are not necessarily a leading indicator for the broader American economy.