For years, automakers have operated under the assumption that global supply chains would remain largely unchanged…

But with President Trump’s 25% tariffs on imported vehicles now in full effect, that assumption has been shattered—catching many companies off guard.

General Motors (GM) has been among the hardest hit—dropping to around $46-47 from its recent highs in the $50s.

Now, management is scrambling to figure out what to do next.

Let’s break down why this is such a big deal… why GM might be in deeper trouble than most people realize… and better investment ideas in the auto sector.

The Mexico problem

GM manufactures nearly all of its trucks—its most profitable products—in Mexico. In fact, 25% of the 2.7 million vehicles GM produces annually come from south of the border.

The company’s commitment to Mexico runs deep. It has 330 dealerships and over 25,000 employees in the country.

During Trump’s first administration, he floated the idea of similar tariffs. At the time, GM started making contingency plans to shift some of its production out of Mexico.

But when those tariffs never came to fruition, GM abandoned those plans and continued expanding overseas. 

And during the Biden Administration, it doubled down on its overseas investments, pouring billions into expanding operations to maximize profit margins.

Now, that strategy is backfiring in a big way. At this point, GM is poised to lose money on every vehicle it imports from Mexico under the new tariff structure.

It’s worth noting that these 25% tariffs don’t just apply to Mexico—they hit all vehicles imported into the U.S. GM manufactures cars in 30 different countries, so this isn’t just a localized issue. 

But hold on… because it gets even worse for GM.

GM’s buyback blunder

In November 2023, GM announced a massive $10 billion stock buyback program. Within months, it had already burned through about half of it—repurchasing 87 million shares at an average price of $53 per share.

Why the rush?

It seems GM was eager to push its total share count below 1 billion—basically checking a box it could brag about to Wall Street.

Then, in February 2025, it doubled down—announcing another $6 billion buyback, with $2 billion slated for immediate repurchases. Management also raised the stock’s dividend by 25%.

At the time, analysts cheered these moves… But now, with the stock trading below the buyback price and major operational hurdles ahead, this looks like a textbook case of poor financial timing.

That cash would have been far more useful on the balance sheet right now.

The road ahead for GM

Relocating manufacturing isn’t as simple as flipping a switch. It requires years of planning, billions in investment, and navigating regulatory red tape.

The smart play would be for GM to immediately halt stock buybacks and dividend increases… and start conserving cash while it figures out a long-term solution. 

In the short term, the company’s profit margins are going to take a serious hit. It can’t simply pass the 25% cost increase onto consumers without risking a steep decline in sales.

That leaves GM in a precarious position.

Where to put your money

With so much uncertainty, GM is looking more and more uninvestable.

If you’re looking for alternative ways to play the sector, auto parts retailers like AutoZone (AZO) and O’Reilly (ORLY) could be solid bets. These companies actually benefit from current conditions—higher vehicle costs mean consumers hold onto their cars longer, increasing demand for repairs and parts. That explains why both stocks are trading at all-time highs—and there’s more room to run (or drive). 

It’s also worth highlighting that Trump’s tariffs could breathe new life into American manufacturing hubs. If automakers are forced to bring production back to the U.S., cities that once thrived on auto manufacturing, like Detroit, could see a resurgence. Investors might want to keep an eye on real estate in these areas, as well as companies involved in factory construction and manufacturing equipment.

The bottom line

GM’s got some tough decisions to make, and fast. Management needs to come up with a plan that addresses the company’s manufacturing footprint while dealing with the immediate hit to its bottom line.

For the rest of us—investors, suppliers, employees, and anyone who drives a GM vehicle—this is worth keeping an eye on. We’re not just watching one company adapt; we might be witnessing the beginning of a major shift in how and where cars are made.

In the coming months, watch for announcements about GM preserving cash, relocating factories, or changing its pricing strategy. The next few quarterly reports should tell us a lot about whether it can navigate this mess—or if it’s in for a long, bumpy ride.

For Frank and Daniel’s deep-dive discussion on GM’s troubles, tune into last week’s WSU Premium.