United States president Donald Trump and his administration was encouraged to resolve trade disputes fast by Ford Motor Co’s Chief Executive Officer Jim Hackett. But he also warned that if the trade disputes are not resolved fast, the tariffs would cause “more damage” to his company. He said that the tariffs imposed on China by the White House have already resulted in losses to the company.
“The metals tariffs took about $1 billion in profit from us — and the irony is we source most of that in the U.S. today anyways,” Hackett said in an interview on Bloomberg Television. “If it goes on longer, there will be more damage.”
Later in a symposium of businesses, Hackett said that a deal is imminent on a new North American Free Trade Agreement.
“I think there’s going to be news about Nafta being closed soon,” Hackett said. “Europe and North America are making tremendous progress as it relates to vehicle discussions and now we have to deal with China.”
The use of tariffs by the Trump administration as well as the retaliatory tariffs by China and elsewhere has already been opposed by a number of global auto makers including Ford. Trump’s tariffs on steel and aluminum were described as a “significant headwind for us” by Jim Farley, Ford’s president of global markets, last month. The Trump tariffs on vehicles also resulted in Ford, the second largest US auto maker to stop its plans to import its new Focus Active crossover vehicles that are manufactured from China into the US, a few week after the statement by Farley.
“What we’re urging our administration to do — where we’re in China and in Europe — we say, you need to come to agreement quickly,” said Hackett, who added that trade issues are “top of mind” for him.
American business was being paralyzed by the trade dispute, Hackett said.
“Business, you hear them talk about, they count on certainty,” Hackett said. “In this case, we’re kind of frozen. A lot of businesses aren’t sure and that’s not good.”
Hackett said that the challenge of global overcapacity to manufacture cars was is being compounded by the new restrictions on trade, such as the threat of imposing new tariffs on on vehicles coming into the U.S. as issued by Trump.
“There’s too much capacity maybe in the wrong places and that’s why the trade question is so important,” he said. “The footprint for production was more malleable before these trade structures. Now we’re going to have to deal with lanes that we can only distribute in.”
In 2107, Ford generated a net income of $7.6 billion which was the highest in five years. But since the trade war began, analysts issued forecast that the company would see a drop of 29 per cent in profits in the current year. Ford has consequently set aside a restructuring plan worth $11 billion to enhance the profit margins in its core automotive business. At the same time, it has also decided to invest billions in development of technologies for electric and autonomous vehicle technology.
So far this year, Ford shares have dropped 25 per cent in the US.
(Adapted from Bloomberg.com)