85% North America content in vehicles, an unrealistic target: U.S. Auto industry to Trump Administration

The U.S. auto industry has gone at great lengths to to convince the Trump administration of the importance of NAFTA for the industry. In fact, in October 2017 major auto dealers, automakers and suppliers had launched a coalition to back NAFTA.

Major automakers across North America have urged the Trump administration not to take the United States out from the North American Free Trade Agreement (NAFTA) and expressed hope that the three countries, United States, Canada and Mexico, can rejig, improve and modernize the historic trade pact.

Sergio Marchionne, Fiat Chrysler Automobiles NV’s CEO who last week announced the carmaker’s plans to relocate the production of its heavy pickup truck from its plants in Mexico to Michigan by 2020, said he hoped the Trump administration would “retune” some of its demands in the trade talks.

NAFTA is heavily used by U.S. automakers and any significant changes to the accord will have massive ramifications across their supply chain.

Speaking at a news conference at the Detroit auto show, Marchionne stated FCA’s truck production shift in part “goes a long way I think in addressing some of President Trump’s concerns about the dislocation of production capacity out of the United States.”

FCA’s decision is aimed at minimizing the risks of its trucks getting hit by a 25% import tariff if the NAFTA agreement falls apart.

On Sunday, Jim Hackett, Ford Motor Co’s CEO told reporters NAFTA needs “to be modernized,” while adding that of Detroit’s Big Three automakers, Ford has the highest percentage of U.S.-built vehicles.

“We’ve got a big commitment to our country and it’s proven in the numbers,” said Hackett.

Incidentally, Ford does not build trucks in Mexico, unlike FCA and General Motors.

NAFTA also has the support of Michigan Governor Rick Snyder, a Republican, who had met Vice President Mike Pence in December to urge the U.S. administration to improve NAFTA instead of coming out of it, which would deal a massive blow to the U.S. auto industry.

“That would be a negative for all three countries,” said Snyder to reporters after touring the auto show.

According to Jim Lentz, North America’s chief for Toyota, if NAFTA were to unravel it would raise costs, put U.S. jobs in harm’s way and raise costs. Furthermore, the proposal that 85% of all vehicles have North American content, in order to avoid the tariff, is unworkable.

“There’s not a vehicle that meets that,” said Lentz and “It’s not like we are not investing in the United States”.

Reiterating his view was Marchionne who also said the target of 85% isn’t feasible.

“I’m hopeful that we’ll see a more rational number going forward and if it is more rational, then I think we’ll be able meet the standard,” said Marchionne.


Categories: Creativity, Economy & Finance, Entrepreneurship, Geopolitics, HR & Organization, Regulations & Legal, Strategy, Sustainability

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