Trump, Twitter and the auto industry
Thirty years ago, if you had told me that Bob Dylan would win the Nobel Prize for Literature or that the president of the United States would be able to influence corporate manufacturing decisions through an electronic medium called “Twitter,” I would not have believed you. But, to quote The Bard, “The times, they are a-changin’.”
In January, Ford Motor Co. announced that it had canceled plans to build a $1.6 billion factory in San Luis Potosi, Mexico, and will instead invest $700 million in its Flat Rock (MI) Assembly Plant to build electric and autonomous vehicles. The move is expected to create approximately 700 new jobs at the plant, starting in 2018.
Before and after the election, President Donald Trump had been critical of Ford’s plan to build the Mexico factory and vowed to impose a 35 percent “border tax” on any Mexican-made vehicles imported into the U.S.
Ford has insisted that the change of plans had nothing to do with President Trump. The company will save some $500 million overall by canceling the Mexico plant, and it expects to get some tax incentives from the state of Michigan. What’s more, Ford still plans on shifting some production of the Focus to an existing plant in Mexico.
Ford isn’t the only automaker to raise the ire of the 45th president. GM, Toyota and BMW have also been targeted. “General Motors is sending Mexican made model of Chevy Cruze to U.S. car dealers tax free across border. Make in U.S.A. or pay big border tax!” wrote the president in a Jan. 3 tweet.
“Toyota Motor said will build a new plant in Baja, Mexico, to build Corolla cars for U.S. NO WAY! Build plant in U.S. or pay big border tax,” he added in a Jan. 5 tweet.
And, in an interview published in the Jan. 15 issue of the German newspaper Bild Zeitung, President Trump warned that the U.S. will similarly tax vehicles made at BMW’s assembly plant under construction in San Luis Potosi. Scheduled to open in 2019, the $1 billion plant is being built to produce the 3 Series sedan.
While it’s gratifying to hear any president stand up for U.S. manufacturing, care should be taken that America-first criticism doesn’t go too far. It’s important to note, for example, that BMW actually produces more cars in the U.S. than it sells here. And, Toyota has invested $22 billion in the U.S. over the past 60 years and employs 136,000 people in the country.
Here’s more food for thought. Uncertainty over the Trump administration has sent the Mexican peso to record lows. Ford’s nixed assembly plant was expected to create 2,800 direct jobs and 10,000 indirect jobs. At least a dozen parts suppliers had already begun the process of setting up shop near the factory. It’s not hard to imagine that the folks who missed out might head for the border in search of work. Perhaps that’s why we’ll need a wall.