Auto industry reacts to Trump

[kevm14]

http://www.motortrend.com/news/inaugura ... 238BDEDEC4

Ford's is interesting.

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 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.”

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.”

[kevm14]

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.”

Also Mark Reuss is the man.

Meanwhile Cadillac's response was uninteresting.

[Bob]

Trump is creating a lot of uncertainty with his reckless tweeting. What he actually does remains to be seen. If there's one thing a large, capital intensive industry hates, it's uncertainty. The leaders in the article are all polished executives who are trying to say the right thing, but inside they're probably really nervous. My guess is if you polled them on who they would rather deal with in the white house, you might be surprised by the results. The auto industry is incredibly complex and intertwined, especially when you include the supply base, that dramatically altering NAFTA is not likely to achieve the desired result.

[kevm14]

I wasn't inferring that Trump is going to be awesome because some execs said some not terrible things about him. And my Mark Reuss comment was not based on that quote. On the other hand, it will supposedly cost another $1000 to build the Corolla here vs Mexico. I understand that in volume that is a huge amount of money. But I will also say that is far smaller than I anticipated. They weren't building it in Mexico because it was like half the assembly cost. It was fractionally cheaper, and cheaper is cheaper. The more important point is, a $1000 more expensive Corolla isn't some unsustainable proposition. Maybe it is worth having that conversation (maybe not via Twitter).

[kevm14]

Doesn't anyone find it strange that Honda and Toyota have been built here forever but "American" manufacturers build cars elsewhere.

That's because American manufacturers have to deal with the UAW and their ridiculous pension plans for low skilled workers. Honda and Toyota make thousands of dollars more per car built in the US because they don't have any unions. Even considering that, most American cars are still built here.

That invites a good union discussion. I had been meaning to post an article or two on that, how the auto unions have learned from the bankruptcy stuff. Basically the gist was, they learned to be less us vs them, and more cohesive because if the company doesn't survive, their job goes away. And oh by the way, building cars in places where there is a less unionized workforce (or one that just has lower wages) is economical to do. So why can Honda, Nissan, Toyota, BMW and all those guys build cars here? The inconvenient truth is, they build in the southern US.

You can strike that your job is worth $40/hr, but if they build somewhere else, or go out of business, who's paying you $40/hr? The job has to actually exist and for years the union acted as if it was a right. If you can't take your skills to another company and get the same paycheck, you are probably overpaid. Again, the articles I found explain how this transformation happened and how the union/mgmt relationship in today's auto industry is much better than it was.

[kevm14]

Kinda this.

Our trade with China is imbalanced roughly 4 to 1. If we had a "trade war" with China, and worst case ended all trade with China, they would be hurt far, far worse than we would.

The Chinese already impose tariffs and restrictions on American products comparable to those Trump is threatening them with. WE are responding in kind to what they have been doing to us for years.

We are the customer, China and Germany are vendors. Why so many people are so afraid of how our vendors would react if we put tariffs on their products comparable to the tariffs they already have on ours is a mystery to me.

[Bob]

I wasn't inferring that Trump is going to be awesome because some execs said some not terrible things about him. And my Mark Reuss comment was not based on that quote. On the other hand, it will supposedly cost another $1000 to build the Corolla here vs Mexico. I understand that in volume that is a huge amount of money. But I will also say that is far smaller than I anticipated. They weren't building it in Mexico because it was like half the assembly cost. It was fractionally cheaper, and cheaper is cheaper. The more important point is, a $1000 more expensive Corolla isn't some unsustainable proposition. Maybe it is worth having that conversation (maybe not via Twitter).

$1000 per vehicle in the auto industry is how normal people think of a million dollars. It is huge. I have seen suppliers lose business over cents per vehicle, so you can imagine how much management salivates over the opportunity to save $1000. $1000 might represent a very significant percentage of the assembly costs of a Corolla, since I believe most of the car costs are in the components by the time it gets to final assembly (if that makes sense). Of course, you could also flip this around and say that because most of the costs are in the components, why not just assemble in the US? At the end of the day $1000 is $1000 and on a car with a starting MSRP below $20k, that's meaningful.

[kevm14]

With sales, incentives, trim variations, negotiation variations, and so on, I don't see a $1,000 variation as significant to the final transaction price at all. But I don't buy new cars.

Building the Corolla here (with the associated cost, barring my argument above) probably does more for the economy than saving 8 cents on an individual component so I don't see those as the same thing.

On the other hand, if I live on a coast, I probably haven't cared about auto manufacturing since the 1980s.

Which goes back to another point: automation is just as big of a "threat" to the blue collar job as the outsourcing was. And that's fine - it's still jobs.

It is hard to fully understand the plight of the blue collar worker as a white collar professional. I am not saying that all of a sudden I care a great deal, but it is pretty easy to be flippant when the perspective is white collar engineering design with overseas manufacturing. You have a job so what's the issue, right? Third person you....not you you.

Continuing to talk to myself, and back to the union thing, people aren't owed jobs for life just because the skill they did possess happened to be in demand, and then isn't. I understand both sides.