We should start ignoring Trump’s tweets about the auto industry – Business Insider

Posted: Tuesday, January 03, 2017


Chevrolet Cruze Lordstown
A Chevy
Cruze being built in Ohio.

GM

This coming week, I’ll be driving to Detroit to cover the North
American International Auto Show.

I did the same thing last year, and once again my route will take
me through Lordstown, Ohio — right past the factory where General
Motors’ Chevy division builds the Cruze, a compact sedan that’s
among the most successful vehicle GM has ever sold.

You can’t miss the Cruze pride at Lordstown: There’s a gigantic
banner of the car on the side of the factory. Since 2010, nearly
every Cruze sold in the US or Canada — that’s well over a million
cars since 2010 — has rolled off the Lordstown assembly line.

With sales that could cross 4 million globally in the next year
or so, the Cruze is an amazing story for GM, a carmaker that had
effectively abandoned the small-car market in the US before the
financial crisis.

President-elect Donald Trump has made the Cruze and GM his latest
Twitter target, threatening
GM with a border tax
because the automaker thought it might
be a good idea to bring a few Mexican-made hatchback versions of
the Cruze into the US to see if adding a trim level in the second
half of 2016 would enhance the Cruze story and give dealers a
vehicle with more SUV-like functionality in a booming SUV market.

Trump has no understanding of the modern, global auto industry,
and yet he isn’t afraid to take to Twitter to show off his
ignorance. The fact is that the Cruze is built on a global
manufacturing platform and sold worldwide in numerous markets
under GM’s different regional brands.

Interestingly, the auto industry doesn’t seem to care what Trump
tweets — it quickly figured out that he’s using Twitter to
bolster his Save American Manufacturing Jobs pledge. Eventually,
the markets will also figure this out and stop knocking a
percentage point or two off automakers’ stock prices every time
Trump turns to 140-character brinkmanship.

US car companies build cars all over the place, and at time they
bring cars into markets from outside those markets. The car I’ll
be driving to Detroit is a Buick made in China.


Cruze Hatchback reveal
The Cruze hatchback being
revealed in Detroit.

GM

GM didn’t
immediately respond
to my request for comment, but in a
statement to CNBC the auto giant said that they imported and sold
only a tiny number of Cruze hatches from Mexico.

“General Motors manufactures the Chevrolet Cruze sedan in
Lordstown, Ohio. All Chevrolet Cruze sedans sold in the U.S. are
built by GM’s assembly plant in Lordstown, Ohio. GM builds the
Chevrolet Cruze hatchback for global markets in Mexico, will a
small number sold in the U.S.,” the statement reads.

The auto industry has already shifted its Trump strategy to what
it really wants, which is for his administration to push back or
eliminate higher Corporate Average Fuel Economy (CAFE) standards.
The carmakers have been lobbying for a break on these, even as
they stay on track to achieve the higher mandates. The problem is
that they don’t want to be building the slow-selling small cars
and alternative-fuel vehicles that are required to comply with
the regulations, when they can be rolling hot-selling, profitable
trucks and SUVs.

Ironically, bringing some Cruzes in from Mexico is a way to
forestall additional layoffs at the Lordstown plant. The lines
there are scheduled to be idled for a week later this month, and
a third shift will be discontinued as well,
according to reports
.


GM chart
Trumps tweet didn’t really
knock GM stock for a loop.

Markets
Insider


Cruze sales have been declining as the market turns to favor
SUVs. GM isn’t going to drop the vehicle, but it is trying to
figure out how to keep it going in the US. That’s where the
hatchback came in.

Get it? Importing some stock from Mexico was a job-preserving
strategy.

Everyone in the auto industry knows this. Ford was attacked by
Trump for doing the same thing. Executives might have been
initially ruffled by the soon-to-be Tweeter-in-Chief, but they’ve
figured out his game. If a border tax does arrive, the carmakers
will simply shift production on US market vehicles to US plants.

Unfortunately, by losing their multi-country safety valves — the
ability to shift inventory around based in demand or temporary
market conditions — American autoworkers’ jobs will be a greater
risk.

I’ll remember that when I drive by Lordstown this weekend.

Comments

Write a Reply or Comment:

Your email address will not be published.*