Auto industry wary of presidential free-trade rhetoric – Detroit Free Press
TRAVERSE CITY — A political issue facing the automotive industry that many executives have stayed silent about is presidential campaign rhetoric about free trade and the future of NAFTA.
Free trade is an emotionaltopic for blue collar workers who have seen plants closed and manufacturing jobs shipped to Mexico where wages are much lower.
Republican nominee Donald Trump has vowed to force Canada and Mexico to renegotiate NAFTA (North American Free Trade Agreement) and threatened to withdraw from the agreement if they don’t. UAW President Dennis Williams said last month Democratic nominee Hillary Clinton has promised to re-evaluate NAFTA. Trump is likely to make more comments about NAFTA when he speaks Monday at the Detroit Economic Club in Detroit.
“Politically, Trump is saying the right things,” said Richard F. Dauch, president and CEO of Accuride Corp.
Dauch’s views on NAFTA are unusually blunt compared to most in the auto industry. He argued in Traverse City last week at an automotive industry conference that the loss of U.S. manufacturing jobs because of NAFTA has led to a decline in the standard of living for many in the U.S.
“That is the angry middle class we have,” he said. “The guys who can’t come out of high school anymore and get a good job and have a cabin Up North. They have to have two jobs, their wife has to work; they have to borrow a bunch of money to send their kids to college. It’s got to come to a head at some point.”
Aside from Dauch, most automotive executives, politicians and analysts dance around questions of free trade, though many say privately that any radical change to NAFTA would cause turmoil for the industry.
Gov. Rick Snyder and Ontario Premier Kathleen Wynne, minutes after signing a deal pledging additional cross-border cooperation across a variety of automotive issues, each said NAFTA has benefited the Great Lakes region.
Wynne noted that more goods cross the border between Ontario and Michigan each year than in any other trade corridor in North America and most of those goods are automotive parts. Snyder reminded a group of reporters he pushed for years for the construction of a new bridge across the Detroit River in part to make the flow of trade easier.
Snyder and Wynne declined to comment directly about NAFTA critiques from the presidential candidates..
“Generally, I have been very pro trade, in terms of saying it is good, we are becoming more global, we are creating export opportunities. We’ve seen export growth, go up significantly In Michigan over the past few years,” Snyder said.
Said Wynne: “Given the particular discourse right now, it’s really important that those of us who really appreciate how important it is to have open trade speak up,” Wynne said.
In July, Mark Reuss, GM’s executive vice president, global product development, said he watched the Republican National Convention closely but declined to comment on Trump’s free-trade statements.
“It’s multi-faceted issue. We all build, sell and make all of our technology and vehicles all the way through a treaty like NAFTA,” Reuss said. “I don’t know what the proposal is so it is hard for me to comment on it.”
Trump has attacked Ford for investing in Mexico even though most almost every other domestic and foreign automaker has built new plants there. In April, Ford said it would invest $1.6 billion to build a new plant in San Luis Potosí, Mexico, where it will likely to build the next-generation Ford Focus.
“NAFTA has incentivized plants to move to Mexico, closing factories across the United States,” Trump said in a statement at the time. “When I am president, we will strongly enforce trade rules against unfair foreign subsidies, and impose countervailing duties to prevent egregious instances of outsourcing.”
Ford Executive Chairman Bill Ford said in May that the presidential campaign’s political discourse had reached “a new low.”
‘”In my mind, Ford ought to be the company that’s being held up as a real success story,” Ford said when asked about Trump. “We didn’t take the bailout, we paid back our debts, we pulled ourselves up by our bootstraps. We’re investing in America. We’re exporting out of America. And so, I think we have a great story to tell.”
Trump’s attacks on Ford have been viewed as largely unfair because nearly all automakers, including Audi, BMW, Fiat Chrysler Automobiles, General Motors, Honda, Hyundai, Nissan, Mazda, Toyota and Volkswagen have built new plants in Mexico or plan to expand existing plants.
Automakers like Mexico’s lower wages, but the country also offers a proven workforce, and a robust rail and shipping infrastructure.
Mexico has established free-trade agreements with 45 countries while the U.S. has trade agreements with 20 countries, according to the respective governments.
By 2020, Mexico is expected to build one in four vehicles in a North American industry of 18.6 million annual units, according to IHS Automotive. The U.S. will see its hold on North American production fall to 68% from 72% in 2000. Canada could see its share decline to about 9% of the output from nearly 17% in 2000.
Industry groups that represent the views of multiple companies have more freedom to speak on behalf of the industry.
Paul Ryan, vice president of trade and competitiveness for Global Automakers, an industry group that represents 12 foreign automakers that operate in North America, said his members now produce 5.3 million cars and trucks annually in the U.S. compared with 2.1 million in 1994 when NAFTA went into effect.
Automakers have been making billion-dollar investments and structuring global operations according to NAFTA rules for more than 20 years. Changes to the treaty could be costly, he said.
“It is the North American Free Trade Agreement that has enabled the U.S. auto industry to thrive over the last three decades,” Ryan said. “We continue to press the case that … a continuation of the U.S. trade commitments to trade is the best course.”
While many displaced workers blame NAFTA for lost jobs, Ann Wilson, vice president of the Motor Equipment Manufacturers Association, said automotive suppliers employ 730,000 workers today, a 10% increase compared with five years ago.
“From the supplier perspective, we are very dependent on open borders between Canada, the U.S. and Mexico,” Wilson said. “Anything that would forestall that or hinder that would not be helpful for the industry.”
But for Dauch, the issue is personal. He’s the son of the late Richard E. (Dick) Dauch, cofounder of American Axle and Manufacturing. The company closed its historic Detroit Manufacturing Complex in Detroit and Hamtramck in 2013 and moved the work to Mexico.
The younger Dauch, who worked for his father’s company for many years, had already left by that time. But he was disappointed that the company decided to make the move to lower costs. About 5,500 jobs were lost.
Today, American Axle is building a new 350,000-square-foot research and development center on the site and plans to hire 250 engineers and researchers.
“It makes me hurt when I go to Detroit on Holbrook Avenue and I see the big blue building that is either gone or all the jobs gone,” Dauch said. “I went to a funeral in Detroit this week for a guy who worked there 55 years. There were 10 or 12 workers that came to say hi to me. … They find new jobs, but they are not the same quality of jobs.”
Contact Brent Snavely: 313-222-6512 or email@example.com. Follow him on Twitter @BrentSnavely.