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Inauguration Day: Auto Industry Speaks Out on Uncertain Future Under Trump

There’s a lot of fact-gathering going on as carmakers hope for the best and try to duck Twitter attacks

There’s a lot of fact-gathering going on as carmakers hope for the best and try to duck Twitter attacks

It is inauguration day. Hopefully, President-elect Donald Trump is too busy to tweet about automakers on his auspicious day. But his thumbs have been busy in the past few weeks, especially tweets that further his campaign to push automakers to build more cars in the U.S.—not Mexico, Canada, Germany, or anywhere else on the planet, seemingly, despite the global nature of the auto industry.

Initially Ford, General Motors, and FCA were in his crosshairs, but Trump widened his sphere of attempted influence to include others including Toyota, BMW, Mercedes-Benz, and VW.

On the surface, it appears he gained some strong results, given the number of companies that have put out releases about investment in plants and jobs in this country, some at Mexico’s expense. Those who follow the industry know many of the announcements are touting decisions made long before Trump decided to run for president, and some decisions reflect efforts to better meet the changing buying habits of consumers. They also reflect the growing recognition that appearances matter, peerhaps more so than facts, in some instances.

Against that backdrop, the Motor Trend team took advantage of our time at the North American International Auto Show to ask automaker executives from around the world what they expect from a Trump administration, and if they are changing how they do business as a result. Pretty much everyone said they would love more clarity than the 140-character tweets that have hinted at policy changes so far. “It’s new territory for most of us,” Sergio Marchionne, CEO of FCA, said. “None of us have had a tweeting president before.”

We have distilled their answers here.


Sergio Marchionne, CEO of Fiat Chrysler Automobiles (FCA)

Sergio Marchionne

Sergio Marchionne was peppered with questions about Trump in a media roundtable on the heels of the January 9 announcement that FCA will spend $1 billion USD to retool U.S. plants, part of a plan devised years ago but one that would make it possible to move Ram heavy duty pickup production from Mexico to the Warren assembly plant in Michigan if necessary. Here are some excerpts from his answers:

What is your position in reaction to threats of a border tax for vehicles entering the U.S. from Mexico?

“We will adjust when the rules change, if they get changed,” he said. He noted that tweets are not rule making, and he needs clarity on Trump’s trade policies before he can make decisions or take action. “If he decides to impose a border tax, we’ll have to adjust. We had no way to do it until Warren was free. Now we can adjust.”

Did Trump influence the investment decision?

“It is not a pre-emptive strike against a tweet, just an extension of what was already planned,” Marchionne said. He had not talked to Trump or his advisers. But if large economic tariffs are imposed, “It will make production of anything in Mexico uneconomical. We would have to withdraw. It is quite possible … The reality is the Mexican automotive industry has for a number of years now been tooled-up to try to deal with the U.S. market. If the U.S. market were not to be there, the reasons for its existence are on the line.”

Do you fear a tax on imports from Canada as well, and could it impact your operations there?

“To the best of my knowledge there have been no tweets on Canadian production of cars,” he said, joking that he needs to be wary if the prime minister starts tweeting. His expectation is that Canada will not be involved. But he warned: “It’s a combination of tariffs and costs.  If we just can’t recover the costs of the vehicle, that would be lethal, I think, to Windsor [Ontario, where the Chrysler Pacifica minivan is made].”


Bill Ford, Ford executive chairman

Bill Ford

Bill Ford is the one who talks to Trump, billionaire to billionaire. He was the one who called Trump to give him the news Ford was canceling plans for a new $1.6 billion USD plant in Mexico and investing more in the U.S., an announcement that followed a number of tweets threatening to penalize Ford for making cars in Mexico (a position that has not changed).

Have you talked to Trump?

“I talked to him last week before we did our announcement. I have frequent conversations with them. He’s very accessible, very easy to talk to, so I’m really pleased.”

Should the president of the U.S. be dictating Ford’s management policy with respect to where you make vehicles?

“He’s not. We made that decision. It was the right business decision. We will always make the right business decision for Ford. But it’s important that we inform him of that. We understand his policies and where he is going.”

What’s the impact on Canada?

“Canada’s been a great place for us, and I don’t see that changing.”

What do you talk about in regular conversations with Trump?

“We talk about all kinds of things: trade policy, currency fluctuations, tax policy, all the things that would affect our business. And I have found him to be very informed and very respectful of our position. I’m very encouraged by some of the early indications, particularly on tax policy. The corporate income tax rate is something all American companies would like to see lower. That’s something he’s indicated he’s willing to take on.”


General Motors

GM came under attack in a tweet denouncing production of the low-volume Chevrolet Cruze hatchback in Mexico. But Trump has also invited CEO Mary Barra to sit on a panel of business leaders advising the president on economic policy, and Barra was planning to attend the inauguration.

Mark Reuss, GM executive vice president, global product development, purchasing and supply chain

Mark Reuss

Have you ever met Trump?

“I haven’t, no. We worked on a car for him a long time ago, but I never met him. Actually, that’s not true. I haven’t thought about this in years. It was at a Daytona 500 race as a young man with my dad. I sat in the suite at Daytona and ate a hot dog next to him and shook his hand and said hello. That was it.” That was as a college student. Reuss has not spoken to him since.

What is GM’s plan for engaging with Trump?

“Well, Mary was asked to be on that advisory deal; that’s a great thing to have a place at the table. … We look forward to a good relationship with him. He’s our president. NAFTA and all those things, they were put in place many years ago. I think every industry in the world is set up around the rules and the policies. Those guys make those, and we’re here to play by the rules and make a business out of it.”

Do you see any direct positives or negatives to him taking office, to this administration?

“I think he’s a business person obviously. He understands, I think, the desire to provide return to shareholders and employ people to do that and make great products, to be successful doing that. I do believe that he understands all that. I don’t think that’s a bad thing at all. I think that’s a good thing.”

Given the way he’s engaged companies and even individuals directly on Twitter in a very public way, do you live in fear of a Trump attack? Do you have a plan in place for when he does?

David Albritton, GM spokesman: “No, we don’t, actually. We were actually talking about that as a comms team. This is a very long cycle business. For him to talk to us or to address us in that fashion, he’s got to understand the model that we live in. We made these decisions years before we come up with these platforms.”


Johan de Nysschen, president of Cadillac

Johan de Nysschen

If President Trump were to tweet at your company, does Cadillac have a plan? Are you worried about a Twitter attack?

No, we’re not worried about a Twitter attack. I don’t think we need to be the focus of any of that. There is no clear certainty in my mind as to exactly what the incoming administration’s policies are going to be. We’re all waiting and seeing. I would just say quite candidly, we look forward to working with the incoming administration to ensure that we have a very strong and globally-competitive U.S. auto industry. We would like to help shape policies to deliver that.”

Have you in any of your business dealings around the world, the different brands, any experience meeting with him? Ever worked with him?

“I have met Mr. Trump many times. I have had dinner with him on several occasions. That was both in my time at Audi and also with Cadillac, so I’m familiar with him and the Trump organization.

Is anything that he has done or said surprised you, based on what you know about him?

“No. When one meets somebody in a business environment you talk business, so you never at that stage indicate at any particular strong political leanings. I guess I watched with interest as did every other person who watched the whole election unfold.”


Jim Lentz, CEO of Toyota Motor North America

Toyota Motor North American CEO Jim Lentz

Toyota was the first foreign automaker to become the subject of a twitter blast from Trump, one that mistakenly said the Corolla plant was to be in Baja California, Mexico when it is in Guanajuato. Jim Lentz warned that Trump’s America First plan of insisting automakers manufacture locally—or face a border tax—could backfire. ­

Given that Toyota has already been the focus of a Trump Twitter attack, how do you see your future interacting with Trump?

“We’re reacting to his communications, not necessarily to Donald. I don’t think anyone disagrees with what his intention is: to have more employment, stronger wages, and a better economy. All of us benefit by that, especially the auto industry. There’s more money to spend on cars, gasoline is probably going to remain cheap, and it helps us maintain 17 million-plus (annual auto sales).  What we’re trying to make clear is that it’s difficult to look at one plant in Mexico in isolation from everything else that we do. In the U.S., we’ve invested $22 billion USD over the past 60 years. Over the next five years, we will invest $10 billion USD dollars, just in the U.S.”

Are you afraid of the day Trump realizes Canada is not part of the United States?

“Shhhhhhhh. Well, if he goes border tax, it’s going to be all borders. He’s not going to be able to pick and choose.”

If the Trans-Pacific Partnership goes away, what kind of stress does that put on Japanese automakers and the U.S.?

“There are already agreements between the countries. Example: New Zealand and Australia are already part of TPP. We already have trade agreements with those two countries. We produce (the U.S.-built) Highlander for both of those markets. So it just makes it easier, exporting from the U.S., if you have the same agreement with a number of countries, rather than a series of one-offs. Not that we still can’t export without TPP. It just would be easier to have TPP.”

What happens if you have to build Corolla in the U.S. or face a border tax?

“We calculate that it’s going to be a $1,000 USD increase in cost on that car. If that’s kind of the baseline, imagine what that’s going to do to the average car. If we just jacked up the cost of the car, it’s difficult to push that on to the consumer. So everybody is going to have to adjust the model mix and adjust the overall volume of the industry. I worry about the unintended consequence of that: The industry drops, we cut production, and employment goes down. It will have the opposite effect of what we’re trying to do, and that’s the frustrating part.”

Of industries that would suffer the most from a border tax, where does automotive fit?

“It’s one of the highest. Retail gets hurt pretty hard as well. But I think on a percentage basis, automotive is really the worst. Energy gets hit pretty hard; aerospace benefits the most.”


BMW

Trump told a German tabloid he would tax BMWs imported to the U.S., and he said the cars should be built in the U.S. Yes, a plant is under construction in San Luis Potosi, Mexico, but Trump seemed unaware that BMW made more cars in the U.S. last year than it sold. The U.S. is also the automaker’s second-largest market but home to BMW’s largest plant; Germany is the top market but home to the second-largest plant.

Ian Robertson, member of the board of management of BMW AG, sales and marketing

BMW Ian Robertson

What positive and negative effects do you think that the Trump administration is going to have on the business?

“I think it’s too early to say what’s going to happen, but we’re encouraged by what we see, you know, the economy is moving in the right direction. I think that’s good for the market this year, and overall we’re pretty much happy to be in the United States. It’s our biggest manufacturing site in the world, Spartanburg [South Carolina] is getting a billion dollars of investment right now. It’ll move from 400,000 to 450,000 capacity, the new X7 will be worldwide supplied from here, and we export around $10 billion USD worth of cars every year from the U.S. That’s the largest export quantity of any other manufacturer in this country. We will have invested $7.5 billion USD in Spartanburg. We have 8,000-plus direct employees. We will take on more as the X7 comes on stream. So we’re very comfortable. This is our second home; there’s more investment here than in any other country in the world. So from that perspective I think we will work with the new administration in the same way that we’ve worked with every administration before.”

Any chance you can get Trump to tweet some positive things about BMW?

“That’s not my gift, unfortunately!”

Do you have a plan in place in case you are the subject of a tweet?

“Who does? Ask Meryl Streep.”

Are you at all worried that electrification will be de-emphasized in the new administration?

“I think at the end of the day electrification is going to be part of the portfolio moving forward. I mentioned that we’ve sold 100,000 by now. You know this year we’re planning 100,000 [electrified vehicles] in one year—but we’re planning for over 2 million sales, so overall it’s still a relatively small.”


Daimler

Mercedes-Benz made about 360,000 cars in the U.S. last year and sold 380,000. It has a large plant in Alabama and will share a small plant in Mexico with Infiniti.

Daimler CEO Dieter Zetsche

Dieter Zetsche

Will you change any of your actions or plans?

“I will wait for the inauguration date. Before that I won’t speculate. We believe we have reasonable and responsible plans going forward. We have had good collaborations with the former administrations, no matter from what side they came in, therefore our assumption going in is that the same will apply in the future. Beyond that, we don’t know…what-ifs don’t lead anywhere,” he said, as the company awaits more information on policy. “Politics set the framework for the economy, and companies have to adjust to the framework if needed.”

There is a strong populist sentiment against globalization. How much of a problem is this for the automotive industry, and how does the industry address it?

“It is a problem for the world,” he said, noting that historically there have always been swings in this regard, and he is hopeful of a good outcome.


Volvo Cars CEO, Hakan Samuelsson

Hakan Samuelsson

Volvo and Sweden have flown under the radar, but the country’s Social Democrat leader sent a letter to Trump congratulating him and urging the continuation of trans-Atlantic ties. Helping Volvo’s cause: It is building its first U.S. plant in South Carolina. It will open next year and employ about 4,000 people.

What impact could a Trump administration have on Volvo?

“Let’s see what happens. We have a different situation [than Ford and Toyota]. We never sourced our production out to Mexico. This is the first time in the company’s history to invest in the U.S., and the plant will be used 50 percent for U.S. [sales] and other half for export. So we are exporting from the U.S. and creating jobs. With open trade and exchange between markets we are creating jobs. So we have a different story than the others. Free trade is good, for a market economy. Certain cars we must build [in Sweden]. We can’t build every car in every country. It would be very expensive. [In the fall of 2018], we will start (building) our S60 sedan in Charleston, for export to Asia and Europe. Trade in both directions is fair, but we will also react to local legislation and tariffs.”


Michigan Governor Rick Snyder

Rick Snyder at 2017 Detroit Auto Show

Snyder is a Republican but did not endorse Trump and criticized some of his distasteful remarks during the campaign. The governor is a self-professed nerd, the antithesis of the larger-than-life president. But he is a staunch supporter of the auto industry and Michigan’s Motor City.

What advice do you have for auto executives in engaging with Trump?

“Show economic value. It’s about job creation.” He pointed to Michigan’s ability to “create an environment for success, and it really has made a difference … Then within the auto industry there’s a huge opportunity to take it to the next level with all the mobility, with the intelligent vehicles, to create a regulatory environment to encourage that and to do it in a thoughtful way, a safe way. The intelligent vehicle thing, if you looked at what President-elect Trump has said, infrastructure’s a key priority. Actually, intelligent vehicles can help reduce the cost of the massive infrastructure investment we need to make.”

Alisa Priddle, Ed Loh, Frank Markus, and Mark Rechtin contributed to this story.