Trump and the auto industry: An inaugural reality check – Detroit Free Press
Automakers used to complain their economic and technological importance were underappreciated, but at the rate the Trump Administration has begun, the industry is already praying for a return to anonymity.
President Trump did not mention automakers specifically in his inaugural address on Friday, but he talked a lot about lost factories and lost jobs.
Only the most venal executive can support the race to the bottom of the wage scale some industries engaged in as they moved manufacturing to low-pay countries, but there’s more to automaking than that, and there’s much more to automakers’ recent announcements about investment and production than a direct response to Trump’s kvetching.
It’s “mostly theater to play in the news cycle created by President Trump’s tweets,” Autotrader senior analyst Michelle Krebs said. “These investments and hiring plans have long been in the works, but the timing and the way these investments are being packaged for public relations are definitely influenced by his Tweets.”
Competing in the global market demands a worldwide technology and manufacturing plan. American automakers suffered in the past when the vehicles they sell at home got too far out of sync with the rest of the world.
Most production decisions, including the recent announcements, are based on that principle. Recent announcements like GM’s $1 billion investment are a communication strategy, not a new approach to manufacturing.
“The decision…was likely made months ago,” Kelley Blue Book analyst Michael Harley said. “The timing of the announcement shows General Motors is more than willing to play the new administration’s publicity game.”
Facing the president’s willingness to criticize individual companies, smart automakers will package their investment plans for consumption at 1600 Pennsylvania Avenue.
“Several GM officials stressed that the latest moves were in the works for months and, in some cases several years,” NBC News reported last week.
Given the attention President Trump’s stream of consciousness auto analysis receives, an occasional reality check is in order.
Here’s where we stand as the new administration begins.
Statement: Ford cancelled a plant in Mexico and brought the work back to America.
Reality: Ford cancelled plans to build a new assembly plant in Mexico. Bad news for Mexico, but not good news for the United States. The Focus compact car Ford was moving from Michigan to the new plant will now move to another Mexican plant Ford opened in 1986, during the George H.W. Bush Administration, seven years before NAFTA was passed.
Statement: The U.S. doesn’t export vehicles; we’re losers in the global market
Reality: U.S auto exports hit a record 2.7 million in 2016, says John McElroy of TV’s “Autoline This Week.” We ship vehicles to 150 countries around the world. Wards Auto reports our largest trading partners are Canada: 969,000; China, 266,000; Mexico, 225,000; and Germany, 176,000.
American-based companies build millions more vehicles around the world, the great majority of which they sell in the markets where they build ‘em.
Statement: GM should build the Chevrolet Cruze hatchback in the U.S.
Reality: There probably wouldn’t be a Cruze hatchback if GM had to build it in the United States. The Cruze hatch is the poster child for why interconnected global manufacturing footprints make automakers stronger. Chevy sold about 184,300 Cruze sedans in America last year – all built in Lordstown, Ohio. It brought 4,500 hatchbacks in from Mexico. GM wouldn’t have invested millions of dollars for that few vehicles in Lordstown, but it makes sense to build them in Mexico, where that body style is popular and sells well. Mexico also has trade treaties with other countries that let it export Cruze hatchbacks there, countries the U.S. doesn’t have trade deals with.
Without Mexican production, the 4,500 Americans who bought Cruze hatchbacks might be lost to Chevrolet, customers of some other brand.
Statement: Moving Focus production to Mexico cost American jobs.
Reality: The Wayne assembly plant in suburban Michigan that built the Focus and other small cars is converting to build the midsize Ranger pickup and Bronco SUV. The plant’s workers will be idle during the changeover, but their jobs should be more secure when they start making the trucks, which are likely to be more popular and profitable than small cars. The Ranger goes on sale next year, the Bronco in 2019.
Statement: Germany should buy more American cars
Reality: I could feel GM and Ford executives wincing when Trump picked this fight.
Germans already buy hundreds of thousands of cars GM and Ford make in Germany. The automakers have struggled for years to get their European arms back in the black, an effort that won’t be helped by German Minister of economics and vice Chancellor Sigmar Gabriel’s tart response that Americans should “build better cars.”
As is frequently the case, Ford seems the most disadvantaged by Trump’s pique. Ford produces more than a million vehicles a year in Europe, but they all bear the Blue Oval badge and Ford name: They appear American, regardless of where they’re built. GM, on the other hand, uses the Opel brand it bought 90 years ago, so its cars seem as German as bratwurst on a bun.
Statement: Trump’s pressure on Ford saved the Lincoln assembly plant.
Reality: Where to begin? First, there are no “Lincoln assembly plants,” there are Ford plants that also build Lincolns. Second, none were scheduled to close; Ford planned to move production of about 40,000 Lincoln MKC small SUVs from Louisville, KY, so its plant there could build MORE Ford Escapes, another small SUV that had a shot at becoming America’s best-selling passenger vehicle, a crown Honda and Toyota have passed back and forth for years. Ford scrapped the plan to build MKCs in Mexico because it no longer thinks it needs those extra vehicles.
Combined with the decision not to build a new plant in Mexico, the bottom line may be that Ford is less optimistic about U.S. sales today than it was six months ago.
Contact Mark Phelan: email@example.com or 313-222-6731. Follow him on Twitter @mark_phelan.