Detroit Auto Show feels the ‘Trump Effect’
Washington’s shadow has fallen across the Detroit Auto Show for nearly a decade.
Since the Great Recession sent automakers crawling to the federal government for a rescue, they’ve been developing vehicles to please a market of politicians and regulators.
{mosads}Consumers, meanwhile, walked past the green, clean machines on the floor of the North American International Auto Show and instead stopped to drool over the roamy sport-utility vehicles, muscular trucks and growling sports cars.
This week, the mix of vehicles on display in Detroit is pretty much the same. But everything else has changed.
For one thing, the current models seem incidental. There were scant block-buster reveals, and nobody is talking about zero-to-sixty. Instead, the buzz is mobility — ride sharing, self-driving cars, and whatever other Jetson-like incarnation is in store for the automobile.
That’s created a palpable nervousness dubbed the “Trump Effect” during this week’s NAIAS media preview days.
“Companies need certain things to conduct their businesses,” says Michigan Democratic Rep. Debbie Dingell, a former General Motors executive whose congressional district includes Dearborn, home of Ford Motor Co.
“Tweeting doesn’t offer much certainty.”
Fiat Chrysler CEO Sergio Marchionne similarly told reporters Trump’s tweeting is “new territory,” adding his company will “respond to whatever it is he determines is relevant policy to the United States, and life will go on.”
Already, FCA has announced plans to invest $1 billion in Michigan and Ohio plants to build new Jeeps and Ram trucks; some of that production had been slated to go to Mexico.
That follows Ford’s pledge to invest $700 million in a suburban Detroit factory to build small cars, and scrap plans to build a Mexico plant.
Together, the two projects should create 2,700 new American jobs.
Trump responded with atta-boy tweets, and took credit for arm-twisting the companies into the surprise decisions. And maybe he deserves some.
The automakers have a huge self-interest in keeping the new president happy. They are at the center of trade and environmental policy, and their future profitability rests heavily on how these issues shake out under Trump.
Automakers have done a balancing act on trade pacts. The Detroit Three opposed the Trans Pacific Partnership (TPP) because it didn’t do enough to address currency manipulation. But they’ve benefited nicely from the North American Free Trade Agreement (NAFTA), and while they favor some adjustments, they’d be tossed upside down should Trump make good on warnings to scrap it altogether.
Similarly, with the Environmental Protection Agency scrambling to finalize fuel economy rules in the final days of Obama’s term, the automakers will need Trump’s help in undoing the damage.
One reason domestic automakers shifted production to Mexico was to drive down the cost of making the unprofitable small and alternative fuel vehicles the feds demand but consumers won’t buy. Electric and hybrid vehicles claim barely 3 percent of the market, despite heavy government subsidies and tens of billions of dollars in research and development expenditures by the automakers. Mandating more of them will cut deeply into profits, which have been soaring lately.
These companies are adept at accommodating the whims of presidents.
If mollifying the new one means moving a few jobs north of the border to help him fulfill a campaign promise, it’s a small price—as long as he delivers the regulatory relief they need to keep their profit surge going.
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