I appeared on Michigan’s Big Show this morning to discuss the latest fallout in Washington to General Motors’ plans to idle four plants in three states.
I appeared on Michigan’s Big Show this morning to discuss the latest fallout in Washington to General Motors’ plans to idle four plants in three states.
Published 11:10 a.m. ET Oct. 1, 2018 |
Washington — Canada has agreed to join the U.S. and Mexico in a new trade deal that would replace the North American Free Trade Agreement, preserving automakers’ hopes for a trilateral pact between the three nations.
But analysts said it could increase manufacturing costs and prompt manufacturers to raise prices — and sway carmakers’ decisions about future small-car production in North America, which is already in decline due to poor consumer demand.
The new deal known as the United States-Mexico-Canada Agreement — or USMCA — would give at least six years of certainty to automakers who fretted about the possible collapse of the trilateral free trade zone that was established when NAFTA was enacted in 1994.
Without an agreement, tariffs of 25 percent could have been placed on Canada-built SUVs and pickups like the GMC Sierra and the Lincoln Nautilus.
“The elimination of a 25 percent tariff on imported vehicles is a huge win,” said Ivan Drury, senior manager of industry analysis at the Edmunds.com automotive information company, “but the new regional value-content requirements mean that automakers will not able to source parts as freely, so there will be added costs associated with vehicle manufacturing.”
Drury continued, “Given that new vehicle prices are already stretched to record highs, things could take an ugly turn for consumer wallets, especially considering the trend of continuously rising interest rates.”
The announcement of a trilateral agreement brings to a close a contentious year-plus renegotiation that roiled the U.S. automotive industry. The agreement announced late Sunday by U.S. Trade Representative Robert Lighthizer and Canadian Foreign Affairs Minister Chrystia Freeland calls for increasing from 62.5 percent to 75 percent the percentage of a car’s parts that have to come from one of the three countries to qualify for duty-free treatment.
The Trump administration had initially pushed to boost the so-called domestic content requirement for autos to as high as 85 percent, and add a 50 percent U.S. mandate. But Mexico and Canada balked at those proposals, and automakers vocally argued against them.
Additionally, the USMCA requires that 40-45 percent of an auto’s content be made by workers earning at least $16 per hour.
Vehicles not meeting the requirements would be subject to a 2.5 percent duty.
Additionally, he USMCA contains provisions to protect up to 2.6 million cars and $32.4 billion worth of parts imported from Canada and Mexico from tariffs on imported vehicles that are being considered separately by the Trump administration.
The U.S. imported 2.4 million vehicles from Canada and 1.8 million from Mexico in 2017, according to the U.S. Department of Commerce’s International Trade Administration. Canadian automotive parts imports to the U.S. totaled $30.1 billion in 2016, according to the ITA. Mexico exported $46 billion in auto parts to the U.S. in 2016, according to the Center for Automotive Research.
Michelle Krebs, senior analyst for Autotrader, said that automakers will have to carefully weigh where they build small cars.
“The new NAFTA is just one piece of the puzzle,” she said. “The U.S. is still at war with China on trade. That needs to be resolved. Agreements with the EU and Japan, where small cars are made and brought to the U.S., need to be completed.
“Each manufacturer will have to decide how many small cars they need,” Krebs continued. “The popularity of all cars is in decline – hitting a record-low share in August with no end in sight. Manufacturers make little to no money on them. There will be much that goes into deciding what to build and where in the small car world.”
In a press conference Monday in the White House Rose Garden, President Donald Trump said, “I have long contended that NAFTA was perhaps the worst trade deal ever made.”
“Since NAFTA’s adoption, the United States racked up trade deficits totaling $2 trillion, and it’s a much higher number than that,” Trump continued. “With Canada and Mexico, it lost vast amounts of money and lost 4.1 million manufacturing jobs and 1-in-4 auto jobs. Throughout the campaign I promised to renegotiate NAFTA and we have kept that promise.”
Trump said he intends to sign the agreement by November and submit it to Congress for approval. The deal will be subject to review in six years and will end in 16 years unless all three countries agree to another 16-year renewal.
Another central issue in the last-minute negotiations between the U.S. and Canada was access to Canada’s dairy market for U.S. farmers. Under the new agreement, Canada will provide new access to U.S. dairy products and poultry products including chicken, eggs and turkey.
Some skepticism remains
Auto stocks traded higher on news of the trilateral agreement. Ford Motor Co. stock closed Monday trading at $9.32 per share, up 0.8 percent. General Motors Co. stock closed at $34.20, up 1.6 percent. Fiat Chrysler Automobiles stock closed at $17.99, up 2.7 percent.
On June 8, 2018, in La Malbaie, Quebec, Canada, U.S. President Donald Trump, left, is greeted by Canadian Prime Minister Justin Trudeau outside the Hotel Fairmont Le Manoir. (Michael Kappeler/DPA/Zuma Press/TNS)
On June 8, 2018, in La Malbaie, Quebec, Canada, U.S. President Donald Trump, left, is greeted by Canadian Prime Minister Justin Trudeau outside the Hotel Fairmont Le Manoir. (Michael Kappeler/DPA/Zuma Press/TNS) (Photo: Michael Kappeler/DPA, TNS)
John Bozzella, president and CEO of the Association of Global Automakers, which lobbies for foreign-owned automakers, said Canada’s decision to join the United States and Mexico is an important step, “but it does not alter the fact that the cost and complexity of complying with the new auto rules will pose serious challenges for U.S. automakers.”
Jonathan Smoke, chief economist for Cox Automotive, noted that automakers are not out of the woods with tariffs yet.
“Nearly a quarter of new vehicles bought by Americans are assembled in countries outside of North America, and a substantial number of vehicles sold are dependent on parts from countries like China that remain very much in the crosshairs of the administration,” he said.
But U.S. carmakers put a positive spin on the agreement.
Joe Hinrichs, Ford’s executive vice president and president of global operations, said the company is “ready to be a collaborative partner to ensure this agreement is ratified in all three markets because it will support an integrated, globally competitive automotive business in North America. The benefits of scale and global reach will help to drive volume and support manufacturing jobs.”
General Motors added: “This agreement is vital to the success of the North American auto industry; we have long supported efforts to modernize it in a way that strengthens the industry and positions it for long-term success.”
But Gary Jones, president of the United Auto Workers union, is wary.
“Given the history of loopholes in NAFTA,” he said, “the UAW will withhold final judgment until all the pieces are put in place in order to determine whether this agreement will protect our UAW jobs and the living standards of all Americans.”
Published 4:54 p.m. ET Sept. 27, 2018 |
Washington — The U.S. Securities and Exchange Commission is suing Tesla Inc. CEO Elon Musk for “falsely” announcing on Twitter that he was considering taking the Silicon Valley automaker private. The agency is also seeking to bar him from running Tesla or any other public company.
On Aug. 7, Musk tweeted: “Am considering taking Tesla private at $420. Funding secured.” Later that day, he continued: “Shareholders could either to sell at 420 or hold shares & go private.”
“My hope is *all* current investors remain with Tesla even if we’re private,” he also wrote then. “Would create special purpose fund enabling anyone to stay with Tesla. Already do this with Fidelity’s SpaceX investment.”
In a federal lawsuit filed Thursday in the Southern District of New York, the SEC alleges that Musk’s tweets “falsely indicated that, should he so choose, it was virtually certain that he could take Tesla private at a purchase price that reflected a substantial premium over Tesla stock’s then-current share price, that funding for this multi-billion dollar transaction had been secured, and that the only contingency was a shareholder vote.
“In truth and in fact, Musk had not even discussed, much less confirmed, key deal terms, including price, with any potential funding source,” the lawsuit continues. “Musk’s false and misleading public statements and omissions caused significant confusion and disruption in the market for Tesla’s stock and resulting harm to investors.”
Tesla shares dropped more than 13 percent to roughly $266 in after-hours trading on the news — down sharply from the $379 per share they reached after Musk’s initial tweets outlining his plans. And a week later, he took a company blog to tell investor that Saudi Arabia’s Public Investment Fund was interested in financing the transactions — a claim the Saudi’s failed to confirm.
In a statement released by Tesla, Musk said: “This unjustified action by the SEC leaves me deeply saddened and disappointed. I have always taken action in the best interests of truth, transparency and investors. Integrity is the most important value in my life and the facts will show I never compromised this in any way.”
Steven Peikin, co-director of the SEC’s Enforcement Division, said in a statement the agency is suing Musk because “corporate officers hold positions of trust in our markets and have important responsibilities to shareholders. An officer’s celebrity status or reputation as a technological innovator does not give license to take those responsibilities lightly.”
Added Stephanie Avakian, co-director of the SEC’s Enforcement Division: “Taking care to provide truthful and accurate information is among a CEO’s most critical obligations. That standard applies with equal force when the communications are made via social media or another non-traditional form.”
Musk’s tweets on taking Tesla private resulted in a run on the company’s stock that led to a temporary suspension of trading of the company’s shares. Tesla shares climbed to $379 by market close on Aug. 7, up $37.58 — and boosted Musk’s personal wealth by $1.4 billion over the course of two hours.
Musk’s tweets also came minutes after the Financial Times reported that Saudi Arabia’s sovereign wealth fund had built a stake in Tesla worth about $2 billion — less than 5 percent of the company’s value.
The SEC lawsuit alleges “Musk knew or was reckless in not knowing that each of these statements was false and/or misleading because he did not have an adequate basis in fact for his assertions.
“When he made these statements, Musk knew that he had never discussed a going-private transaction at $420 per share with any potential funding source, had done nothing to investigate whether it would be possible for all current investors to remain with Tesla as a private company via a ‘special purpose fund,’ and had not confirmed support of Tesla’s investors for a potential going private transaction,” the lawsuit says.
The SEC lawsuit also alleges that Musk “also knew that he had not satisfied numerous additional contingencies, the resolution of which was highly uncertain, when he unequivocally declared, ‘Only reason why this is not certain is that it’s contingent on a shareholder vote.’
“Musk’s public statements and omissions created the misleading impression that taking Tesla private was subject only to Musk choosing to do so and a shareholder vote,” the lawsuit says.
David Kudla, CEO of Grand Blanc-based Mainstay Capital Management LLC, said Musk’s tweets were a risky way to announce his company’s fiscal plans.
“Musk proves Twitter is not an effective platform to float company structural changes,” said Kudla, who has been skeptical of Musk’s pronouncements about Tesla’s stock and encouraging short-selling the company’s shares.
“Elon Musk is in the midst of engineering a significant amount of wealth destruction for Tesla shareholders,” Kudla continued. “Thankfully, I have been and remain short Tesla shares. The hits just keep coming for Tesla.”
Michelle Krebs, senior analyst for Autotrader, said the lawsuit against Musk “is a self-inflicted wound that Tesla didn’t need right now with all it has on its plate: production challenges with the Model 3; the push to turn a profit; the revolving door of managers; and an onslaught of competition coming.”
Published 3:29 p.m. ET Sept. 26, 2018 |
Washington — Auto industry executives warned members of the U.S. Senate on Wednesday about the possibility of higher car prices and industry-wide job losses if President Donald Trump imposes new tariffs on imported cars and auto parts.
The hearing, conducted by the U.S. Senate Finance Committee, occured as the U.S. Commerce Department is investigating the national security impact of allowing imported cars to come into the U.S. The inquiry, referred to as a Section 232 investigation in reference to a 1962 trade law that allows the president to impose tariffs if he determines a security threat exists, was used recently by the Trump administration to impose tariffs on imported aluminum and steel.
The Trump administration has floated the possibility of placing a 25 percent tariff on imported vehicles. They argue that auto imports pose a similar threat as they found foreign aluminum and steel did. It is unclear which countries would be included if the Commerce Secretary recommends moving forward with the tariffs on imported cards.
The investigation and implementation could take up to a year, if the example of the metals tariff is any indication.
Rick Schostek, executive vice president of Honda North America, told lawmakers that his company has built most of the cars that it intends to sell in the U.S. since 1982. Last year, he said, 66 percent of the 1.65 million vehicles Honda sold in the U.S., were made in one of the company’s U.S. plants.
“Every manufacturer, no matter who, who builds vehicles does it with both domestic and globally sourced parts,” Schostek said. “A new tax on imported parts would increase the price of every vehicle built in U.S. factories, and similarly a 25 percent tariff on imported vehicles would depress sales. The industry would end up purchasing less from U.S.-based supplies, resulting in U.S. job loss. It’s estimated that the tariffs will increase the price of a new vehicle up to $7,000.”
Steve Gates, principal owner of the Toyota dealership Gates Auto Family in Richmond, Ky., said tariffs would place additional burdens on car buyers who are already grappling with the rising cost of new cars.
“I used to think if I worked hard and I kept my expenses in line and I took car of my customers that I could at least to get by,” said Gates, who is also secretary and treasurer of the American International Automobile Dealers Association, which lobbies for car dealers. “But if a 25 percent tax is levied on imported vehicles and parts, it won’t matter how good a car dealer I am. People can’t, or won’t, buy cars. They’ll just be too expensive.”
Gates, who described himself as a third-generation car dealer, noted the cost of a new car has increased by 35 percent over the past 20 years, rising to nearly $36,000 in 2017. Additionally, he said, interest rates for auto loan financing have risen in recent months, further complicating the car buying process for most consumers.
Josh Nassar, legislative director for the United Auto Workers, said his union is “keeping an open mind” on the possibility of imposing tariffs on foreign cars. He cited concerns about automakers outsourcing factory jobs to Mexico and the lack of labor provisions in previous trade agreements.
“Trade’s not a black-and-white issue for us,” he said. “Of course we’re for trade, our members build products that are exported around the world and it’s very important that we have functioning good trade markets… Now when it comes to tariffs, we think that at times tariffs can be an appropriate tool to address a problem. But they do not constitute a comprehensive strategy in and of themselves.”
U.S. Sen. Debbie Stabenow, D-Lansing, said auto workers in Michigan are looking for targeted solutions that will not harm one of the state’s most dominant industries.
“My mantra always in Michigan — we’re the fifth-largest exporting state, both manufacturing and agricultural, we need to make things and grow things — is we want to export our products, not our jobs,” she said.
“To do that, we need a level playing field,” Stabenow continued. “What’s happening unfortunately with sort of throwing everything at the wall, which is what they’re doing, section 232, section 301, NAFTA, is that there’s total instability right now.”
U.S. Sen. Orrin Hatch, R-Utah, who is chairman of the Senate Finance Committee, also expressed concern about the Trump administration’s frequent use of tariffs in trade disputes.
“For most American families, a car is one of the most expensive purchases they make – often second only to the purchase of a home,” he said. “It is a significant financial commitment for most families, often paid for with debt, and I’m shocked that anyone would consider making it more expensive.”
Published 12:01 a.m. ET Sept. 10, 2018 |
Washington — The Trump administration has asked automakers to voluntarily outline how they are developing and testing self-driving cars on public roads. But only three companies have complied.
Safety advocates say reports that have been submitted so far — by General Motors Co., Ford Motor Co. and the Google-affiliated Waymo, according to the National Highway Traffic Safety Administration — resemble slick marketing brochures instead of stringent regulatory filings.
Critics say the self-driving assessments should be mandatory to ensure compliance from all automakers. They also say the paperwork already voluntarily submitted does little to reassure the driving public that vigorous testing is being done, an answer to polls showing increasing unease about self-driving cars.
The Trump administration says the federal government does not have a mechanism to force automakers to submit safety assessments before they put self-driving cars on the road. They argue that automakers should feel compelled by public opinion polls showing drivers are hesitant to embrace self-driving cars to reassure the public about their products — and the results so far have been mixed.
“As awareness around the development of autonomous technology increases, we’re seeing some dramatic shifts in consumer sentiment,” said Karl Brauer, executive publisher of Cox Automotive’s Autotrader and Kelley Blue Book, in a statement accompanying a recent report on the evolution of autonomy.
“People now have a deeper understanding of the complexities involved when creating a self-driving car, and that has them reconsidering their comfort level when it comes to handing over control.”
Automakers are keenly aware of the challenges. In its 33-page safety assessment filing, GM reported each of its current test self-driving vehicles has “human driver controls” and two humans in the driver and passenger seats.
“We will operate our self-driving vehicles with (autonomous vehicle testers) until they are capable of safe, fully driverless operation,” the No. 1 Detroit automaker said. “We continue to maintain a rigorous focus on safety in the design and development of our self-driving technology and all our operations, including AVT training and operating procedures.”
In a 44-page filing, Ford also reported utilizing human “safety operators” in its self-driving test vehicles for now: “We currently have two-person teams — a safety driver and a ‘co-pilot’ — in all our test vehicles. Also, before we put anyone in the driver or passenger seat of our test vehicles, they go through rigorous training and certification.”
Waymo said in a 43-page filing it “conducts extensive testing on public roads, a closed course, and in simulated driving.” The California-based company notes that its self-driving cars are designated to operate fully autonomously. The company has tested fully robotic cars in Arizona and it has requested permission to do so in California.
“Our fully self-driving system is designed to operate without a human driver, unlike technologies sold in cars today such as adaptive cruise-control or lane-keeping systems which require constant monitoring by the driver,” Waymo said. “Our system includes the software and hardware that, when integrated into the vehicle, perform all driving functions.”
When asked whether it plans to submit a self-driving assessment, Fiat Chrysler Automobiles U.S. said in a statement: “Safety is paramount at FCA US. We will communicate with NHTSA accordingly.”
Volkswagen AG said in a statement provided to The Detroit News it is “currently focusing its worldwide development and testing of AV technology in Germany.” The German automaker said it will “submit a voluntary safety self-assessment letter to NHTSA when the time is appropriate in conjunction with U.S. testing and deployment.”
Hyundai Motor America said of its safety assessment plans: “We will not be releasing anything at this point but are continuing to monitor as we go forward.” American Honda Motor Co. said it has “no plan to submit a self-assessment in the near future.” And Toyota Motor Corp. said it “has sought to be transparent with NHTSA as we pursue further development of automated vehicle technologies and will continue to explore filing a voluntary safety self-assessment with NHTSA.”
The U.S. Department of Transportation has proposed self-driving guidelines that call for automakers and technology companies to voluntarily report on their handling of 12 safety elements that federal regulators say should be involved in all self-driving car testing. The recommendations were originally crafted by the Obama administration, but the Trump administration released an update in 2017 and has said it is planning to release a third version later this year.
Congress is also working to pass a law that would place new regulations on self-driving cars. The Senate is considering a bill championed by Sen. Gary Peters, D-Bloomfield Township, that would allow automakers to sell more than 80,000 self-driving cars each per year. A similar measure that would allow carmakers to sell up to 100,000 self-driving cars each per year has already passed in the U.S. House.
Under the Senate’s proposed measure, automakers would be required to submit a safety evaluation of their self-driving cars within 90 days of the proposed measure’s enactment. The House bill directs the transportation department to develop a mandate that requires carmakers to submit safety assessments within two years of its passage into law. The House measure says the voluntary safety assessments that NHTSA is soliciting from carmakers will be acceptable until then.
There has been contention about whether the federal government has the power to compel automakers to publicly release information about their self-driving testing. The safety assessments were voluntary in the initial self-driving guidelines that were released in 2016, but former Transportation Secretary Anthony Foxx said the idea of making them mandatory was under consideration before Trump’s election.
The Trump administration has since argued that it does not have the power to issue such a mandate, but it has encouraged automakers to voluntarily turn over the information.
“Keeping an open mind to technology that is still developing is why NHTSA has adopted a voluntary approach to safety disclosures,” Deputy NHTSA Administrator Heidi King said in a speech given at the Autonomous Vehicle Symposium in San Francisco last month. “We believe that a voluntary approach is appropriate at this point in the development of the emerging technology because a need to regulate hasn’t been demonstrated.”
Safety advocates have sharply disagreed. They say the Trump administration’s proposed guidelines for self-driving cars are toothless without a mandate that requires automakers to release information about their testing of self-driving cars for public consumption.
“There aren’t real standards about what they are supposed to put in the assessment,” said John Simpson, privacy and technology project director at the Los Angeles-based Consumer Watchdog group. “The result of that is the three we have seen are much more like slick marketing brochures than anything that shows what kinds of tests have been passed or what these things can do.”
Simpson noted there are currently 55 companies that are permitted to test self-driving cars in California, including Ford, GM Cruise, Volkswagen Group of America, Mercedes-Benz, BMW, Nissan, Honda and Tesla Motors.
“If the voluntary la-di-da program was working, you’d have 55 safety assessments that are filed with NHTSA,” Simpson said.
NHTSA said in a statement provided to The News that it “is working with companies to support their disclosure of voluntary safety self-assessments and applauds those that have already proactively taken this step.”
Polls show drivers have been slow to accept the premise of self-driving cars. A recent survey conducted by ORC International showed 69 percent of U.S. residents are concerned about sharing the road with driverless vehicles.
Transportation Secretary Elaine Chao has warned that public acceptance of self-driving cars will continue to lag if auto companies are not transparent about their robot car testing.
“Without public acceptance, automated technology will never reach its full potential,” Chao said in a speech at the AV Symposium in San Francisco. “So, we need to work together to get it right.”
Published 5:10 p.m. ET Aug. 31, 2018 |
Washington — President Donald Trump told Congress on Friday he intends to sign a new trade deal within 90 days to replace the North American Free Trade Agreement with Mexico and Canada — “if it is willing.”
The announcement came after U.S. Trade Representative Robert Lighthizer announced on Friday that talks with Canada about joining a preliminary agreement with Mexico would be put on hold until Wednesday, setting up the possibility of the United States and Mexico moving forward with their own bilateral agreement if a deal with Canada cannot be reached.
“Today the President notified the Congress of his intent to sign a trade agreement with Mexico — and Canada, if it is willing — 90 days from now,” Lighthizer said in a statement. “The agreement is the most advanced and high-standard trade agreement in the world. Over the next few weeks, Congress and cleared advisors from civil society and the private sector will be able to examine the agreement. They will find it has huge benefits for our workers, farmers, ranchers, and businesses.
“We have also been negotiating with Canada throughout this year-long process,” Lighthizer continued. “This week those meetings continued at all levels. The talks were constructive, and we made progress. Our officials are continuing to work toward agreement. The USTR team will meet with (Canadian Foreign) Minister (Chrystia) Freeland and her colleagues Wednesday of next week.”
Freeland also expressed optimism about the talks with the U.S., despite the fact that the Friday deadline that was initially set by the Trump administration to reach a deal was missed.
“We are making progress in our talks to update and modernize #NAFTA, but we are not there yet,” she tweeted. “Our focus remains squarely on workers, families and business. We know that a win-win-win agreement is within reach. We will resume talks next week.”
The announcement came after critical remarks President Trump made about Canada in an off-the-record in an interview with Bloomberg were published by the Toronto Star:
“Here’s the problem. If I say no — the answer’s no. If I say no, then you’re going to put that, and it’s going to be so insulting they’re not going to be able to make a deal … I can’t kill these people,” Trump said of the Canadian government.
Trump took to Twitter to blast the Star, which did not agree to terms that were set during Trump’s interview with Bloomberg, apparently confirming the substance of the remarks attributed to him:
“Wow, I made OFF THE RECORD COMMENTS to Bloomberg concerning Canada, and this powerful understanding was BLATANTLY VIOLATED,” Trump tweeted. “Oh well, just more dishonest reporting. I am used to it. At least Canada knows where I stand!”
Under the preliminary agreement with Mexico, which Trump plans as a replacement for NAFTA, the so-called domestic content requirement for cars would increase to 75 percent from 62.5 percent.
The Trump administration had pushed to boost the requirement to as high as 85 percent, and add a 50 percent U.S. mandate. But Mexico and Canada balked at those proposals and automakers vocally argued against them.
Additionally, under the new agreement, 40-45 percent of an auto’s content would have to be made by workers earning at least $16 per hour. Any changes to NAFTA, or effort to end the original agreement, would require congressional approval. Canada has also yet to sign off the proposed changes.
In a letter to House Speaker Paul Ryan, R-Wis., Trump said, “I intend to enter into the agreement by the end of November 2018.
“Accordingly, pursuant to section 106(a)(1)(A) of the Bipartisan Congressional TradePriorities and Accountability Act of 2015, I hereby notify the House of Representatives and the Senate that I intend to enter into a trade agreement with Mexico — and with Canada if it is willing, in a timely manner, to meet the high standards for free, fair, and reciprocal trade contained therein,” Trump wrote.
Automakers and business groups have implored the Trump administration to make sure that Canada remains included in any NAFTA replacement.
“Auto rules included in the understanding reached between the United States and Mexico are predicated on Canada’s participation,” John Bozzella, president and CEO of the Association of Global Automakers, which lobbies for foreign-owned automakers, said in a statement. “Without it, automakers’ ability to meet the various requirements and content thresholds will be severely constrained.”
U.S. Chamber of Commerce President and CEO Thomas Donohue added: “Anything other than a trilateral agreement won’t win Congressional approval and would lose business support. We appreciate the hard work of the negotiators from all three countries, and urge them to stay at the table and remain focused on concluding a deal that includes the U.S., Mexico, and Canada.”
Published 10:59 a.m. ET July 19, 2018 |
Washington — The auto industry implored the Trump administration on Thursday to pump the brakes on a proposal to impose tariffs as high as 25 percent on imported cars and auto parts under the guise of boosting national security. Such levies, they warned, would result in higher car prices and industry-wide job losses.
Speaking at an all-day comment hearing hosted by the U.S. Department of Commerce, Jennifer Thomas, vice president of federal affairs at the Washington-based Alliance of Automobile Manufacturers, which lobbies for most major automakers — domestic and foreign — was emphatic. “Higher auto tariffs will harm American families and workers, along with the economy,” she said.
“Simply put, auto tariffs are a massive tax on consumers,” she said. “Industry analyses show that a 25 percent tariff would raise the price of an imported car nearly $6,000 and the price of a U.S.-built car $2,000. This would equate to an $83 billion tax on U.S. consumers that would trigger a domino effect on the industry and economy. When vehicle prices rise, demand drops. Lower demand means less production. And when production declines, job losses follow.”
At the request of President Donald Trump, the U.S. Commerce Department is conducting an investigation of the national security impact of allowing imported cars to come into the U.S. In making the request, Trump cited a section of federal law that allows the president to impose tariffs if he determines a security threat exists.
The tariff investigation process, known as a Section 232 investigation in reference a trade law passed in 1962, was used recently by the Trump administration to propose tariffs on imported aluminum and steel. The Trump administration has argued that auto imports pose a similar threat.
The investigation and implementation could take up to a year, if the example of the metals tariff is any indication.
The Commerce Department received 2,356 mostly negative written comments ahead of Thursday’s hearing.
Groups that lobby for automakers in Washington questioned on Thursday the idea that imported cars pose a national security threat.
“Our companies are extremely proud of the contributions they’ve made to the United States in peace and war, and from our perspective, there is no evidence that automotive imports pose a threat to our national security,” said Matt Blunt, president of the American Automotive Policy Council, which lobbies for Ford Motor Co., General Motors Co. and Fiat Chrysler Automobiles.
“We do fully understand that economic security is a vital part of our nation’s national security, and in fact, we have concluded that tariffs under Section 232 would diminish the economic contributions that FCA, Ford and GM make to our nation’s economy today,” Blunt continued. “This is an outcome that would be counterproductive to the administration’s intended goals for the domestic auto industry.”
Peter Welch, president of the National Automobile Dealers Association, added that his organization’s members believe “there is no basis for a finding by the department that the importation of autos or auto parts to the United States threatens the country’s national security.”
Welch cited a Center for Automotive Research study commissioned by his group that showed that a 25 percent on vehicle imports and parts would cause the price of a typical vehicle sold in the United States to rise by $4,400. It found that prices of U.S.‐assembled vehicles would also rise by $2,270 due to an increase in the cost of imported vehicle parts, adding $2,270 to the price. For a typical imported vehicle, tariffs would raise consumer prices by $6,875.
Jennifer Kelly, research director at the United Auto Workers union, cheered the Trump administration for investigating the impact of vehicle imports on the nation’s economy, but stopped short of fully endorsing the idea of imposing tariffs under the guise of national security.
She said the UAW hopes that the Trump administration will take “targeted measures to boost domestic manufacturing” at the conclusion of the tariff investigation.
“We know the auto industry is a global industry with long, complicated, well-established, supply chains,” Kelly said. “We know that any rash actions could have unforeseen consequences including mass layoffs of American workers, but that doesn’t mean that we should do nothing.”
John Hall, an engine maintenance team member for Hyundai Motor Manufacturing Alabama, traveled to Washington on behalf of South Korean automakers to inform the Trump administration of its commitment to U.S. workers.
“I’ve worked for Hyundai since 2005,” Hall said. “Since then Hyundai and its suppliers have invested billions of dollars, and I’ve seen firsthand how these investments have transformed the Alabama economy and created thousands of good manufacturing jobs.
“Like any businesses, ours has faced challenges and downturns,” Hall continued. “But Hyundai didn’t abandon its American workers during difficult times. Instead, Hyundai stuck with American, stuck with Alabama and stuck with the American worker through good times and bad.”
U.S. Commerce Secretary Wilbur Ross said at the beginning of Thursday’s hearing that the Trump administration has not made a final decision.
“It’s clearly too early now to say if this investigation will ultimately result in a Section 232 recommendation on national security grounds, as we did earlier with steel and aluminum and as we have initiated regarding the uranium industry,” Ross said. “But President Trump does understand how indispensable this industry is.”
While the Commerce Department was taking testimony about the tariff proposal, the Association of Global Automakers, which represents international carmakers, conducted a “drive-in” in which domestic workers at foreign-owned plants drove cars they build to Capitol Hill to draw attention to the potential negative impact of tariffs. The auto workers were joined by U.S. Sen. Doug Jones, D-Ala., and U.S. Reps. Drew Ferguson, R-Ga., and Jackie Walorski, R-Ind.
“The broad U.S. auto industry is flourishing and highly competitive, employing almost ten million Americans. We do not need and did not ask for these tariff protections,” said John Bozzella, president and CEO of Global Automakers, who also testified Thursday. “There is no national security justification for taxing imports of vehicles and parts or discriminating between global companies headquartered here or in allied countries. If the Commerce Department’s investigation leads to tariffs, retaliation against U.S. exports is inevitable.”