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Trump talks to US automakers, pushes for new American plants

Wednesday, January 25, 2017 - 08:08

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US President Donald Trump urged the chief executives of the Big Three US automakers on Tuesday to build more cars in the country, pressing his pledge to bring jobs to America and discourage the car industry from investing in Mexico.

[WASHINGTON] US President Donald Trump urged the chief executives of the Big Three US automakers on Tuesday to build more cars in the country, pressing his pledge to bring jobs to America and discourage the car industry from investing in Mexico.

Mr Trump, who has threatened to impose 35 per cent tariffs on imported vehicles, opened a White House meeting with General Motors CEO Mary Barra, Ford Motor Co's Mark Fields and Fiat Chrysler Automobiles NV's Sergio Marchionne by saying he wanted to see more auto plants in the United States.

In return, the new Republican president has vowed to cut regulations and taxes to make it more attractive for businesses to operate in the United States. He promised during his campaign to be a job-creating president and stressed that message in his inaugural address last Friday.

"We have a very big push on to have auto plants and other plants - many other plants," he told reporters at the start of the meeting. "It's happening. It's happening big league."

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Matt Blunt, who heads a US automaker trade association and attended the meeting, told Reuters that Mr Trump asked what his administration could do "on domestic and trade policy that would help make the United States more competitive and strengthen the ability of automakers to add production here."

The hour-long meeting was the latest sign of Mr Trump's uncommon degree of intervention for a US president into corporate affairs as he has repeatedly pressured automakers and other manufacturers to "buy American and hire American."

It was the first time the heads of the big three automakers met jointly with a US president since a 2011 session with Barack Obama to tout a deal to nearly double fuel efficiency standards by 2025. Automakers have urged the Trump administration to rethink those aggressive mandates.

The auto executives on Tuesday raised the issue of the fuel efficiency rules, trade policy and other regulatory matters, another person briefed on the meeting said. Mr Marchionne told reporters afterward that Mr Trump did not give them specifics on what regulations he would cut.

The companies also discussed autonomous and electric vehicles and Mr Trump asked about advanced vehicles, the person said.

EXCESS CAPACITY

With flattening US auto sales and excess capacity in the United States, US automakers have been reluctant to open new US auto plants in recent years. GM and Ford last built new US assembly plants in 2004, while Fiat Chrysler opened a new transmission plant in Indiana in 2014.

Kristin Dziczek, an analyst at the Michigan-based Centre for Automotive Research, said automakers still had excess capacity in North America after suffering in the 1990s and 2000s from overcapacity and shifts in market share.

Building a new plant would take three or more years and cost at least US$1 billion, industry experts said.

Automakers have expanded operations at existing US plants to meet rising demand for trucks and SUVs. GM, Ford, Fiat Chrysler and foreign automakers have announced new US jobs and investments in recent weeks.

Coinciding with Tuesday's meeting, Toyota Motor Corp said it would add 400 jobs and invest US$600 million in an Indiana plant, aiming to boost production of a popular SUV by 10 per cent.

Ford's Fields said automakers wanted to work with Mr Trump to create a "renaissance in American manufacturing" and that Trump's economic priorities were encouraging, including his move on Monday to formally bow out of the 12-nation Trans-Pacific Partnership trade pact championed by Mr Obama. "The mother of all trade barriers is currency manipulation. And TPP failed in meaningfully dealing with that, and we appreciate the president's courage to walk away from a bad trade deal," Mr Fields told reporters after the meeting.

Ms Barra said there was a "huge opportunity" to work together with the government to "improve the environment, improve safety and improve the jobs creation."

US automakers have collectively added more than 78,000 jobs since 2009, the year when GM and Chrysler, now a unit of Italian-American Fiat Chrysler, filed for bankruptcy as part of government bailouts during the US recession. They have invested more than US$40 billion in US facilities during that period.

BUSINESS CASE

Despite the vocal pressure from Mr Trump, the companies are unlikely to truly change their existing business plans for now, said Sam Fiorani, vice-president of global vehicle forecasting with AutoForecast Solutions.

"We need to have more concrete policies from the president," he said. "Automakers will make decisions on whether there is a solid business case. Does it make more sense to build outside the US or to build in the US?"

GM said in 2014 it would invest US$5 billion in Mexico through 2018, a move that would allow it to double its production capacity, and Ms Barra has said the automaker is not reconsidering the plan.

While automakers are adding US jobs, they are also cutting US production of small cars. On Monday, GM ended two shifts of production of small cars in Ohio and Michigan, cutting about 2,000 jobs.

Barclays auto analyst Brian Johnson said in a note on Tuesday that "automakers will be willing to make a deal that would bring back jobs to the US in return for a slower ramp of (fuel efficiency) targets and related state-level mandates."

Auto stocks rose on Tuesday. US-listed shares of Fiat Chrysler gained 5.84 per cent to US$10.88, while Ford was up 2.44 per cent to US$12.61 and GM rose 0.96 per cent to US$37.

REUTERS

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