Trump Threatens Automakers; Ford Cancels Mexico Plans
Trump has repeatedly told us that he plans to punish companies that manufacture goods overseas. In fact, he recently announced that the two “golden rules” for his presidency are buy American, hire American.
In June, General Motors announced that it would utilize “existing production capacity in Ramos Arizpe, Mexico, to supplement production at its plant in Lordstown, Ohio” in order to meet consumer demand.
This Tuesday, Trump issued a no-nonsense threat to GM: Make the Chevy Cruze in the US or face a “big border tax.”
GM explained that while the Cruze hatchback – designed primarily for international markets – is made in Mexico, the sedan version of the Cruze is manufactured in Ohio.
GM sold over 16,000 Cruzes in the US in November, about 1,600 of which were made in Mexico. The company has about 100,000 employs in the US and about 15,000 in Mexico.
Trump has warned automakers that he plans to levy a 35% tax on cars manufactured in Mexico for the US market. PB predicts this threat will lead to negotiations and that the actual border tax will be less severe.
General Motors, Toyota, Honda, Ford, and Volkswagen all have plants in Mexico. Ford has about 8,800 employees in Mexico, which is about 10% of the number it has in the US.
Hours after Trump issued his threat to GM, Ford announced that it would be cancelling plans to build a $1.6 billion plant in San Luis Potosí, Mexico. Instead, it will invest $700 million to increase production in Flat Rock, Michigan.
Employees in Michigan were overjoyed by the announcement. “I don’t know if you can really understand the impact of this investment,” said Jimmy Settles of the United Auto Workers union. “This is the equivalent to a new assembly plant.”
Ford CEO Mark Fields says the expansion will focus on hybrid and electric vehicles, including a new battery-powered sport utility vehicle. “We are encouraged by the pro-growth policies that President-elect Trump and the new Congress have indicated they will pursue,” said Fields. “And 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.”
Fields says Ford is proud to be a “global, multination, company,” but that “our home also is here in the United States… We are the number one manufacturer of vehicles in the US and we employ more hourly automotive workers than any in the US. This will help build on that.”
Editor’s note: Notice how Trump gets things done by talking, taking a negotiating position, establishing that he is the big dog, and watching the other side cave in. A man who knows how to wield power gets a lot more done. Another example, Trump criticized an act by a Republican Congress to change the ethics rules. They backed down immediately.