Wednesday, January 4, 2017
By Kalea Hall
When President-elect Donald J. Trump talks tough to automakers, the automakers listen.
In a Michigan rally in December 2015, Trump took specific aim at Ford Motor Co.’s plan for more production outside of the U.S. and said: “Every car and every truck, and every part manufactured in this plant that comes across the border, we’re going to charge you a 35 percent tax. OK? And that tax is going to be paid simultaneously with the transaction, and that’s it.’”
On Tuesday, Ford surprised analysts by announcing that instead of investing $1.6 billion to build a new plant in San Luis Potosi, Mexico, it will invest $700 million to expand its Flat Rock Assembly Plant in Michigan for electric-vehicle production, along with the Mustang and Lincoln Continental.
The expansion will create 700 direct new jobs.
Also Tuesday, Trump took to Twitter to call out GM on Mexico production, specifically of the Lordstown-built Chevrolet Cruze: “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!”
After Trump’s tweet, GM quickly responded with a statement on its production.
“All Chevrolet Cruze sedans sold in the U.S. are built in GM’s assembly plant in Lordstown, Ohio,” the statement said. “GM builds the Chevrolet Cruze hatchback for global markets in Mexico, with a small number sold in the U.S.”
Lordstown United Auto Workers’ leaders seemed supportive of Trump’s tough talk with regard to Mexico-built cars.
“We stand for fair trade and not free trade, and obviously the trade agreements in place currently have not been favorable to American workers,” UAW Local 1112 President Glenn Johnson said. “If Mr. Trump is going to revisit those agreements ... then more power to him.”
Robert Morales, UAW Local 1714 president, who represents 1,400 fabrication plant workers, said the supplement from Mexico was only three days of production done at the General Motors Lordstown Assembly Complex, so about 3,000 Cruzes.
“We weren’t happy to hear that Mexico was getting our product,” said Morales. “At that point, it was decided that it was necessary because of market share.”
Sedan Cruzes built at the GM plant in Ramos Arizpe, Mexico, are built for the Mexico, Canada and Central America markets. The Mexico-built Cruze sedans did supplement the U.S. market for a short period last year.
However, demand for the compact car has fallen, leading GM to cut the supply and its third shift at the Lordstown plant, affecting 1,245 jobs.
But Trump’s tweet along with the Ford decision seemed to spark an idea from UAW 1112’s Johnson. Before the shift cut, GM Lordstown didn’t have enough time in its schedule to build both the Cruze sedan and hatchback, but Johnson, who represents 3,000 assembly plant workers at GM Lordstown, says now there is time.
The plant would have to be retooled to build both the Cruze sedan and hatchback.
“If GM is willing to bring it here, then GM workers at Lordstown would gladly make it,” Johnson said.
This might be a good time for GM to consider Johnson’s idea. On the campaign trail, Trump repeatedly mentioned his plans for trade deals and made clear he was against Mexico-made products coming to the U.S. market.
Other than a plan to impose a tariff on imported vehicles from Mexico, Trump also said he would renegotiate the North American Free Trade Agreement, or NAFTA, which eliminated most tariffs on trade among Mexico, Canada and the U.S.
Are Trump’s proposals enough to shake up automakers production plans?
“I don’t think there’s any doubt that [Trump] had an impact because when you are canceling a billion-dollar deal, that’s a pretty significant impact, and I can’t imagine that would happen otherwise,” said Jack Nerad, executive market analyst and executive editorial director for Kelley Blue Book.
Ford said it will relocate production of the next-generation Focus to an existing plant in Hermosillo, Mexico, to maintain “profitability and ensure the financial as well as commercial success of this vehicle.”
The Focus is currently built at Ford’s plant in Wayne, Mich. The move of the Focus production to Mexico will bring two new products to the Wayne plant.
During a news conference Tuesday, Ford CEO Mark Fields said the decision to cancel the plant in Mexico was based in part because Trump’s policies and the change in consumer demand for small cars.
“We are ... encouraged by the pro-growth policies that President-elect Trump and the new Congress have indicated that they will pursue,” Fields said. “We believe that these tax and regulatory reforms are critically important to boost U.S. competitiveness and of course drive a resurgence in American manufacturing and high-tech innovation.”
Later Tuesday, Trump was quick to take credit, tweeting a link to the story “Ford to scrap Mexico plant, invest in Michigan; CEO cites Trump policies” from foxnews.com.
Analysts say imposing the high tariff of 35 percent on auto imports from Mexico would cause a massive disruption to the industry.
“In all of the research or reports it seems that that’s more of a number that worked well during the campaign, but in reality to implement that is much more difficult,” said Eric Lyman, vice president for industry insights at TrueCar.
In any case, analysts seem to agree that Trump is having an effect. The debate is still out as to what the effect is.
“I think a lot of this is negotiation tactics and job owning more so than policymaking,” Nerad said.