Ford to Cancel Mexican Plant - Invest $700mm in Michigan Plant

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Trump tariffs threaten Fiat Chrysler’s Mexico plants

The Financial Times  /  January 9, 2017

Marchionne warns of possible closures after announcing $1bn US investment

Fiat Chrysler Automobile (FCA) would have to close its Mexican car plants if Donald Trump follows through on campaign promises to impose stringent tariffs on vehicles coming into the US, chief executive Sergio Marchionne said on Monday.

“It’s possible that if economic tariffs are imposed . . . and are sufficiently large, it will make production of anything in Mexico uneconomical and we would have to withdraw,” Mr Marchionne said at the annual Detroit auto show. “It’s quite possible.”

His comments came only hours after his company drew an approving tweet from the US president-elect by announcing a fresh $1bn investment into the US, creating 2,000 jobs.

“Fiat Chrysler just announced plans to invest $1BILLION in Michigan and Ohio plants, adding 2000 jobs. This after Ford said last week that it will expand in Michigan and U.S. instead of building a BILLION dollar plant in Mexico. Thank you Ford & Fiat C!” Mr Trump wrote.

Fiat’s two separate comments reflect the difficult line that carmakers are having to walk when dealing with the incoming US president, who has repeatedly criticised companies that manufacture cars for the US market in Mexico and threatened to impose 35 per cent tariffs on imported cars.

Fiat Chrysler produces 503,000 vehicles in Mexico a year at two sites in Saltillo and Toluca and exported 86 percent of them to the US or Canada in 2015.

Between 21 percent and 52 percent of parts used in FCA’s Mexican vehicles come from US suppliers, so a decision to shutter plants there could hit them as well.

Marchionne said FCA was waiting to see what Trump and the Republican Congress would do before making decisions about its Mexican presence.

“We want clarity, we all want clarity,” he said. “If they get changed, we have no choice.”

He also insisted that the new US investment did not involve jobs that would otherwise have gone to Mexico. “This wasn’t a pre-emptive strike,” he said.

The FCA group, which also includes the Jeep, Ram, Dodge, Alfa Romeo and Maserati brands, makes 1.8 million cars a year in the US.

Mexico’s car industry has blossomed under the North American Free Trade Agreement, with the industry making 3.4 million cars a year but it is heavily reliant on access to the US and Canadian markets, which account for 82 percent of the country’s 2.7 million exported vehicles.

“The reality is the Mexican auto industry has been tooled up to try and deal with the US market,” Marchionne said. “If the US market were not to be there, then the reasons for its existence are on the line.”

Some carmakers, such as Nissan and Volkswagen, use Mexico as a base to export to Europe or Latin America.

But Marchionne said it would be too expensive to repurpose FCA’s existing Mexican site to export all over the world.

“That transition would be costly and it would be very, very uncertain. There is no easy transition; those plants were designed built and purposed at a time when NAFTA was alive and well,” he said.

[kscarbel2]

Crain’s Detroit Business  /  January 10, 2017

Ford and Michigan officials are being tight-lipped about state economic incentives [free taxpayer money] the automaker will receive for the $700 million investment in its Flat Rock Assembly Plant for future production of electrified vehicles.

Ford CEO Mark Fields Monday refused to reveal the incentives Gov. Rick Snyder's administration promised to secure the automaker's creation of 700 new jobs as part of an investment to bring up to 13 electrified vehicles to market.

"We're in the process of working with the state and anticipating incentives to help support that investment," Fields told reporters during media day at the Detroit auto show. "We'll talk about that once the process is done."

An incentives package will be presented at a later date to the Michigan Strategic Fund board for approval, said Steve Arwood, CEO of the Michigan Economic Development Corp.

Arwood also refused to disclose what incentives Ford is getting for the Flat Rock investment plans, citing a nondisclosure agreement with the automaker.

[Government cites a nondisclosure agreement with big business as an excuse for not telling Americans how their employees are spending taxpayer money]

"We don't discuss those things publicly, obviously, until the Strategic Fund acts," said Arwood.

Arwood said the incentive package will not involve adding to Ford's Michigan Economic Growth Authority tax credits, which were capped in June 2015 at $2.3 billion through 2031.

Ford's agreement to cap the value of its MEGA tax credits was tied to $3.1 billion in capital investments and the retention of nearly 40,000 jobs in Michigan.

The Snyder administration pushed Ford and crosstown rivals General Motors and Fiat Chrysler Automobiles to agree to caps on their MEGA tax credits in 2015 as part of an effort to rein in the ballooning cost of $9 billion in taxpayer subsidies promised to Michigan companies during the height of the economic recession.

"We don't amend MEGAs," Arwood said.

[kscarbel2]

Trump threatens BMW with border tax on cars built in Mexico

Reuters  /  January 15, 2017

President-elect Donald Trump has warned the United States will impose a border tax of 35 percent on cars that German carmaker BMW plans to build at a new plant in Mexico and export to the U.S. market.

Trump was speaking in an interview with German newspaper Bild, which on Sunday released excerpts of his comments translated into German.

A BMW spokeswoman said a BMW Group plant in San Luis Potosi would build the BMW 3 Series starting from 2019, with the output intended for the world market. The plant in Mexico would be an addition to existing 3 Series production facilities in Germany and China.

Trump said BMW should build its new car factory in the United States because this would be "much better" for the company.

He went on to say Germany was a great car producer, borne out by Mercedes Benz cars being a frequent sight in New York, but there was no reciprocity.

Germans were not buying Chevrolets at the same rate, he said, making the business relationship an unfair one-way street. He said he was an advocate of free trade, but not at any cost.

The BMW spokeswoman said the company was "very much at home in the U.S.," employing directly and indirectly nearly 70,000 people in the country.

[TeamsterGrrrl]

Apparently Mr. Trump has not heard of Opel...

[kscarbel2]

The Wall Street Journal  /  January 15, 2017

President-elect Donald Trump told companies they will have to shift manufacturing to the U.S. in order to do business here, in a series of comments indicating a tough posture toward U.S. trade partners.

"Car companies and others, if they want to do business in our country, have to start making things here again. WIN!," Trump wrote on Sunday.

The comments came as Trump reiterated in an interview with German newspaper Bild that his administration would levy a 35% import tax on autos built in Mexico for export to the U.S.

Trump singled out German premium car makers BMW and Mercedes-Benz, saying automotive trade between the U.S. and Germany was a "one-way street."

"When you walk down Fifth Avenue, everybody has a Mercedes-Benz parked in front of his house," Trump said. Addressing the Germans, he said: "You were very unfair to the U.S.A. It isn't mutual. How many Chevrolets do you see in Germany? Not many, maybe none, you don't see anything at all over there. It's a one-way street."

German auto makers have a long history of manufacturing in Mexico. Volkswagen operates one of the largest of its more than 100 plants worldwide in Puebla, Mexico, where it began producing Beetles in 1964. The plant now produces the Golf and Jetta.

Daimler's Mercedes-Benz brand, Volkswagen's Audi and Porsche, and BMW control about 80% of global sales of upmarket premium cars.

A spokesman for BMW said: "The BMW Group is very much at home in the U.S.A. We have a deep level of localization and employ both directly and indirectly almost 70,000 people."

German and other auto makers have flocked to Mexico to take advantage of cheap labor and of Mexico's many free-trade agreements.

Audi, for example, is building Q5 SUVs in Mexico and exporting them back to Europe.

Exports from a U.S. plant would carry trade tariffs because the U.S. and the European Union don't have a free-trade agreement.