Railroad stocks decline following GM plant closure announcement

RELATED TOPICS: CSX | NORFOLK SOUTHERN | SUPPLIERS | SHIPPERS | MIDWEST
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lordstownAerial2017
An aerial view of the General Motors plant in Lordstown, Ohio.
General Motors
In the wake of General Motors’ plant closure announcements, stocks of affected railroads were down in morning trading on Tuesday.

GM’s announcement yesterday to halt production at five plants in North America includes three major auto assembly facilities served by Norfolk Southern, CSX Transportation, and Canadian National. A Norfolk Southern representative declined to comment about the business of specific customers.

General Motors is shedding four models: the Chevrolet Impala, Buick LaCrosse, and Cadillac CT6 sedans, and the Chevrolet Volt hybrid. Production of the Chevrolet Cruze will be limited to Mexico for markets outside the U.S. It’s unclear how suppliers for these vehicles will be affected. Suppliers to the Impala and Cruze include Hella, Valeo, and Inteva among others.

At the end of the trading day Tuesday, NS shares were down 0.8 percent to $162.80; CSX shares were down 0.01 percent to $70.41; and General Motors shares were down 2.55 percent to $36.69, according to Yahoo Finance.

General Motors told the Detroit Free Press that three other plants would gain work.

The Flint, Mich., assembly plant, where GMC Sierra and Chevrolet Silverado pickup trucks are produced, is served by Canadian National. The Arlington, Texas facility, currently running three shifts, builds popular Chevrolet and GMC full-size SUVs. Union Pacific handles traffic at this plant. And GM’s Spring Hill, Tenn., manufacturing facility, currently producing the Cadillac XT5 and GMC Acadia, will add a third vehicle next year. CSX serves this 6.9-million square foot factory.

Nevertheless, GM’s announcement set off a firestorm from politicians on both sides of the aisle.

President Donald Trump won both Michigan and Ohio in 2016 while promising to return jobs to the region. In an interview with The Wall Street Journal today, he said, “I think GM ought to stop making cars in China and make them here.”

Michigan U.S. Sen. Debbie Stabenow, a Democrat, echoed that thought in a statement released yesterday.

“As GM considers future investments and products, it is critical that those investments be made in Michigan — not overseas!” Stabenow wrote.

Republican U.S. Sen. Rob Portman, of Ohio, said in a statement, “I am deeply frustrated with General Motors’ decision to shut down its Lordstown plant and disappointed with how the hardworking employees there have been treated throughout this process.”

Calling for Congressional hearings on GM’s use of corporate tax cuts, Tim Ryan, a Democrat representing the Ohio district that is home to Lordstown, said, “The American people deserve to know if the tax cuts they paid for are being used to inflate corporate profits at the expense of their economic security and the survival of American workers.”

U.S. light vehicle sales in the post-recession period peaked at 17.5 million units in 2016 and declined to 17.1 million last year. According to the Association of American Railroads, U.S. Class I railroads moved 1.8 million carloads of motor vehicles and parts in 2017.

Sales are expected to exceed 17 million this year, but automakers worry about coming years. Announcing the restructuring yesterday, GM CEO Mary Barra said, “These actions will increase the long-term profit and cash generation potential of the company and improve resilience through the cycle.”
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