Twists and trumps: When POTUS bullied automakers to ‘make America great again’
Be it General Motors, Ford or Toyota in US or the Germans, President Trump has been threatening automakers with “big border taxes” on cars imported into US. Here are the showdowns between President Trump and automakers in the US, mostly triggered by a sub-140-character tweet.autos Updated: Feb 21, 2017 12:38 IST
American automakers were among the first to face the President Donald Trump’s off-road drives, who rose to power championing to “make America great again”. Be it General Motors, Ford or Toyota in US or the Germans, Trump has been threatening automakers with “big border taxes” on cars imported into US. While the Donald wants to create more jobs, the automakers want to make their cars in the Mexico, where labour is cheaper.
A week before his inauguration as the 45th US president, Trump posted on Twitter:
will only get higher. Car companies and others, if they want to do business in our country, have to start making things here again. WIN!— Donald J. Trump (@realDonaldTrump) January 15, 2017
Days after taking to office, Trump withdrew US from NAFTA, a 1994 treaty which lifted trade tariffs and restrictions among US, Canada and Mexico.
Here are the showdowns between President Trump and automakers in the US, mostly triggered by a sub-140-character tweet.
Trump and General Motors
Two weeks before his inauguration, Trump tweeted:
General Motors is sending Mexican made model of Chevy Cruze to U.S. car dealers-tax free across border. Make in U.S.A.or pay big border tax!— Donald J. Trump (@realDonaldTrump) January 3, 2017
Trump lashed out at GM for making the Chevrolet Cruze in Mexico, where the company admitted to making only “a small number” of models for export to other countries.
Fact of the matter: Chevy Cruze hatchbacks are not so widely sold in the US, so GM makes them in Mexico at cheaper labour and other manufacturing costs. On the other hand, the Cruze sedans are widely popular in the US, where they are produced at the Lordstown, Ohio factory.
In 2016, GM sold 185,500 units Cruze sedans in the country, while of the 29,000 hatchbacks made in Mexico for global markets, 4,500 were sold in the US, the automaker said in a statement on politifact.com.
Despite Trump’s tweet GM stocks rose 1.8% that morning. The company CEO Mary Barra has also got a seat at the table as one of Trump’s economic advisors.
In 2014, GM had announced an investment of $5 billion in Mexico through 2018 aiming to double its production capacity. CEO Barra stood her ground, and defended the Mexico business, saying “This is a long-lead business with highly capital-intensive investments—decisions that were made two, three and four years ago.”
Trump and Ford
Ford Motor Company was most bitten by Trump’s twitter-teeth. After threats of “big border tax”, Ford scrapped its plans of building a $1.6 billion plant in Mexico and announced a $700 million investment in its Michigan factory. Ford would still move production of Focus small cars to Mexico, but agreed to make lesser number of cars in Mexico.
When he sat down with CEOs of US carmakers on January 23, including GM’s Mary Barra and Ford CEO Mark Fields, Trump said, “You’re not the one singled out, Mary. We’ve a common interest, which I think Mark and I understand.”
Trump and Fiat Chrysler
Trump may not have threatened Fiat Chrysler Automobile (FCA), but took credit when the group’s American wing announced a $1 billion investment to expand its Michigan and Ohio facilities.
It's finally happening - Fiat Chrysler just announced plans to invest $1BILLION in Michigan and Ohio plants, adding 2000 jobs. This after...— Donald J. Trump (@realDonaldTrump) January 9, 2017
Ford said last week that it will expand in Michigan and U.S. instead of building a BILLION dollar plant in Mexico. Thank you Ford & Fiat C!— Donald J. Trump (@realDonaldTrump) January 9, 2017
The holding company of Italian brand Fiat as well as the American luxury car brand Chrysler, FCA made it clear. “This plan was in the works back in 2015. This announcement…was just final confirmation,”a FCA spokesperson was quoted as telling ThinkProgress.
FCA CEO Sergio Marchionne also clarified that the investment was not linked to the Trump threats. “We don’t make investment decisions based on risk of a tweet,” he said at the North American International Auto Show. “I thank him (Trump). We owed the country this investment.”
But FCA has seven manufacturing facilities in Mexico which employs 11,800 workers, and in 2015 shipped 477,000 vehicles. And taxes and restrictions could mean Fiat might have to shut down the factory.
“It’s possible that if economic tariffs are imposed... and are sufficiently large, it will make production of anything in Mexico uneconomical and we would have to withdraw,” Marchionne told the Financial Times.
Trump and Toyota
Trump tweeted this out:
Toyota Motor said will build a new plant in Baja, Mexico, to build Corolla cars for U.S. NO WAY! Build plant in U.S. or pay big border tax.— Donald J. Trump (@realDonaldTrump) January 5, 2017
The Japanese automaker had seen this coming, and within a couple of hours replied a tweet for a tweet:
“Toyota has been part of the cultural fabric in the US for nearly 60 years. Production volume or employment in the US will not decrease as a result of our new plant in Guanajuato, Mexico announced in April 2015. With more than $21.9 billion direct investment in the US, 10 manufacturing facilities, 1,500 dealerships and 136,000 (direct and indirect) employees, Toyota looks forward to collaborating with the Trump Administration to serve in the best interests of consumers and the automotive industry.”
The bold ‘Guanajuato’ was to point out Trump’s mistake of locating Toyota’s new plant in Baja, and also mentioned that it was the smallest importer of cars into US from Mexico in 2016.
Noteworthy, American carmakers have not been successful at breaking into the Japanese car market, though the Japanese giants enjoy a good share in the US. In a meeting with American auto bosses on January 23, Trump had said, “They do things to us that make it impossible to sell cars in Japan.”
Only 15,000 or 0.3% of the cars and light-trucks sold in Japan in 2016, were American. The best-selling American brand in Japan is Jeep, since Japanese automakers mostly make small, economical hatchbacks and sedans, which are technologically advanced rather than big.
Trump and Volkswagen
Trump seemed to have a long-time grudge against the German automakers. During a conversation with the German daily Bild, he was quoted as saying: “When you walk down Fifth Avenue, everybody has a Mercedes-Benz parked in front of his house.” Addressing to Germans, he said, “You were very unfair to the USA. It isn’t mutual. How many Chevrolets do you see in Germany? Not many, maybe none, you don’t see anything at all over there. It’s a one-way street.”
He threatened Volkswagen against shifting jobs to Mexico. The German giant, that has had a plant in Mexico for 50 years, denied shifting any jobs to south from the US. “We do not make our investment decisions based on administrative cycles. Our business is really an 8-, 12-, 14-year horizon when we look at investments,” Hinrich J Woebcken, the president of VW Group of America, said.
Trump and BMW
Trump pointed his bullying gun at the Munich-based automaker, and threatened to impose 35% border tax on cars BMW would build in a Mexican factory and import to US.
In fact, BMW made 411,171 units in 2016 at its Spartanburg plant, the automaker’s largest facility in the world, and sold 365,204 of them in the US itself. BMW, which owns the BMW, Mini and the Rolls Royce brands, exported 287,700 units last year from US, which is almost 70% of the production, making the German automaker the largest car exporter in Trump’s America.
So BMW had a reason to put its foot down, after all, it’s making almost 50,000 more cars in US than it is selling in the country. “BMW is a global company and our new plant now under construction in San Luis Potosi, is part of our expanding global production network of 31 plants in 14 countries that supply our worldwide sales network in more than 140 countries,” a BMW spokesperson was quoted by CNBC as saying.
By 2019, BMW plans to roll out the 3 Series sedan from the plant with a maximum of 150,000 units.
According to German automotive industry body VDA, German carmakers employ about 33,000 workers in the US and about 77,000 more get jobs from German automotive suppliers.
Concerned by threats of taxes and restrictions on free-trade, VDA president Matthias Wissmann said, “In the long term, the United States would be shooting itself in the foot by imposing tariffs or other trade barriers.”
Trump and Tesla
The only American electric carmaker, Tesla has all their hopes pinned on the Trump administration. The face of Tesla, Elon Musk deleted the tweets in which he said: “...the ban on Muslim immigrants from certain countries rises to this level. It is not right. The Muslim immigration ban is not right.”
@Samcornwell they were earlier drafts that I accidentally published. I said the same thing a week already.— Elon Musk (@elonmusk) February 15, 2017
As Elon Musk got a berth in Trump’s business advisory council, the Tesla boss tweeted: “The blanket entry ban on citizens from certain primarily Muslim countries is not the best way to address the country’s challenges.”
Meanwhile, Musk’s deleting his tweet did not go down well on some of the potential Tesla car buyers, who went on to cancel their Model 3 orders:
Another customer of the Model 3, Nate Erickson told BuzzFeed News, “To see someone that I’ve always looked up to so much, give such a half-hearted, mealy-mouthed statement — it was really disappointing.”
Tesla Motors have been great at innovations but poor at business. At such a time, taking a stand against a bully at the top seat could invite serious consequences, and Elon Musk knows that.
First Published: Feb 21, 2017 12:36 IST