Ya know, we all bought cars, just fine back in the day when assembly line auto workers were paid a decent amount (With NO worker Visa's.) Ford, GM and Fiat Chrysler are just used to their lucrative gravy train coming off the backs of cheap labor. Especially the CEO's. .. Honest people always knew that NAFTA was going to provide far more benefits to large corporations and their investors than to the US middle income classes. Free Trade is in fact an illusion as their are always rules, resulting in winners and losers.
#$%$ Ford. If Toyota can make trucks profitably in San Antonio, then Ford can find a way to make it work in the US.
--------------
CEOs usually avoid picking fights with incoming presidents, but Mark Fields is fired up. Eight days after Donald Trump won the 2016 presidential race, the Ford Motor Co. (F) CEO told reporters at a trade show that Trump’s trade plans, if enacted, “would have a huge impact on the economy.” And he didn’t mean a positive impact.
Fields is feisty because Trump, while campaigning, singled out Ford for criticism over its plans to open a new factory in Mexico. Remaking the North American Free Trade Agreement is one of Trump’s top priorities during his first 100 days in office, and that could directly upend billions of dollars in investments Ford, GM and other automakers have made in Mexico during the last decade. Trump has also threatened to impose tariffs on Chinese imports, which could spur a damaging trade war just as China has become an important source of profits for Ford, GM and Fiat Chrysler.
Recent analysis of Trump’s economic plan by S&P Global Market Intelligence highlighted the American auto sector as the one industry most threatened under the new president. “We see autos as the only industry facing a high and negative impact from policies the new administration may adopt,” S&P said. That’s a bit ironic, since the auto industry still employs about 925,000 Americans in the kinds of decent-paying blue-collar jobs Trump wants more of. That number is lower than during the peak years of the early 2000s, but it has nonetheless recovered nicely since the last recession ended in 2009. Millions of additional Americans work in car dealerships, tire retailers and auto-repair shops that will all suffer if the broader auto industry does.
Trump has no beef with automakers, per se, but his trade ideas happen to involve heavy manufacturers with a global footprint—which is exactly what carmakers have become. Ford has 3 production facilities in Mexico and another one planned, while GM (GM) has 4 and Chrysler (FCAU) has 2. Volkswagen and most Japanese automakers have plants in Mexico as well.
Mexico imports about 2 million vehicles to the United States per year, accounting for roughly 11% of the 17.5 million vehicles sold in the US in 2015. The Center for Automotive Research forecasts that Mexican auto production will increase by about 60% by 2022, with several automakers planning to expand there. Production in the United States and Canada should decline slightly during the same timeframe.
Most automakers assemble smaller vehicles in Mexico, because such vehicles have smaller profit margins than pickup trucks or SUVs and labor is a larger portion of the total cost. Cheap labor, not surprisingly, is the biggest advantage of manufacturing in Mexico, where total hourly compensation including benefits averages just $8.24 per hour, according to CAR. That’s 82% lower than the US average of $46.35 per hour.
Limiting Mexican imports
Trump hasn’t spelled out how he wants to rearrange NAFTA, but the basic idea is to encourage or compel more production in the United States, which would mean less production in places like Mexico. But that would be highly disruptive and would penalize American automakers more than their foreign rivals. Trump could probably rewrite the rules in a way that limits Mexican imports to the United States, for instance. But that doesn’t mean automakers would simply move Mexican factories north of the border. They might look for other low-cost countries instead, such as South Korea, India or China. The Trump administration could pursue trade restrictions on those countries as well, but that becomes a game of free-trade whack-a-mole in which the government is trying to tell multinational companies where to invest their money—hardly the lightly regulated pro-growth environment Trump says he wants to create.
If Trump tries to stop US automakers from producing in Mexico, that doesn’t mean he can stop foreign automakers from operating there. So the government would essentially be raising costs for American firms by forcing them out of Mexico, but not for their global competitors. Trade protections can equalize the cost of selling foreign-made cars in the United States—but not in other markets. And Mexico actually has better trade deals in place with Europe and Latin American countries than the US does, which means it’s cheaper to export the same car to Italy or Spain from Mexico than from the United States. That’s one reason Mexico has wooed so many automakers. Moving production meant for export from Mexico to the United States wouldn’t make any sense.
