It is quite clear, at this point, that Trump’s election victory was almost entirely due to support he received from unemployed auto workers in PA, OH, MI and WI, many of whom suffered the devastating consequences of their jobs being exported to Mexico. During the campaigning cycle, many questioned Trump’s decision to repeatedly get on stage and blast auto executives for shipping jobs out of the US but, in hindsight, clearly it worked very well.
And while most auto executives probably took some comfort from Hillary’s “lead” in the polls heading into election day, they’re now terrified that Trump will follow through on a pledge to impose a 35% tariff on imported vehicles. With capital investments already made in foreign countries and U.S. capacity shuttered, there is little that domestic auto OEMs can do in the short-term to offset such massive penalties.
Ford CEO warns of “huge impact” to economy from President-elect Trump’s trade plans following his election https://t.co/u5nUQSWzgH pic.twitter.com/8awconIcNJ
— NBC News (@NBCNews) November 16, 2016
Just yesterday Ford CEO, Mark Fields, delivered a stark warning to the Trump administration from the Los Angeles Auto Show that a 35% tariff on auto imports would have a “huge impact” on not just Ford but the overall economy. While acknowledging that he looks forward to “working with a new administration and the entire newly elected Congress,” Fields also highlighted new plans to manufacture and import their EcoSport SUV from India starting in 2018…a move that the Trump administration may not appreciate so much.
Ford CEO Mark Fields warned that President-elect Donald Trump’s proposed trade plans — which include a 35 percent tariff on motor vehicles imported from Mexico — would have a “huge impact” on the entire American economy, not just the auto industry.
Though Fields said Ford has “had conversations with the transition team” for the incoming president, his comments, made during a keynote speech marking the opening of the 2016 Los Angeles Auto Show, could escalate a sometimes sharp dispute that began early during the election campaign. It was touched off by Ford’s announcement it would shift small car production from U.S. plants to a new factory in Mexico.
Fields used his keynote speech to send a message that aggressive anti-trade moves would be risky, telling reporters and industry officials gathered in downtown Los Angeles that, “A tariff like that (Trump has proposed) could have a huge impact on the U.S. economy.”
Fields tried to soften the tone of his comments, adding that there have been meetings with the transition team, and that, “we look forward to working with a new administration and the entire newly elected Congress.”
But free trade is a must for Ford, he added, Fields indicating that the second-largest U.S. automaker doesn’t intend to back down from plans that it has, in the past, said are necessary to delivering an acceptable return on investment.
In fact, just hours before Fields delivered his morning keynote, Ford announced another move that could lead to further friction with Washington. The carmaker says it will begin selling a new entry-level SUV in the U.S. in 2018, with the little EcoSport coming off an assembly line in India.
While auto executives have attempted to downplay the fact that wages are the primary appeal of moving plants to low-cost areas like Mexico…
Industry planners say that low wages are only a part of the appeal. They also point to the need to balance operations around the world, sometimes shifting production bases to both keep plants operating efficiently and holding down costs.
“The automotive business is truly global. So, to make this whole thing work, you have to have a relatively free flow of components and vehicles across borders,” said Joe Phillippi, head of Auto Trends Consulting. “It’s how you keep the costs down.”
…the facts are somewhat difficult to dispute.
It certainly seems as though this is setting up to be one of the more epic battles of the Trump presidency. While we certainly understand the importance of restoring jobs in the United States, we are also acutely aware of the need of companies like Ford to earn a reasonable return on invested capital for their shareholders while competing in a global market. To that end, it will be interesting to see whether/how the United Auto Workers and their unreasonably excessive contracts will play into negotiations.
And here is Ford CEO, Mark Fields, discussing trade with Bloomberg earlier today (fast forward to the 6:20 mark for the discussion on trade).
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