By Jamie Barrie I n just a few days President Elect, Donald Trump who won the presidency by winning the American heartland, will take office. Trump, who campaigned on making “America Great Again,” was in a constant battle with auto- industry leaders during the election, most prominently Ford’s CEO, Mark Fields over establishing manufacturing operations in Mexico and taking unwarranted credit for bringing production back to the US from Mexico. So what does Donald Trump in the White House mean for the US auto industry especially at a time when U.S. auto sales are at record levels? Well auto makers with established plants in or thinking of moving auto production to Mexico could face increased political interference from the White House. With Trump calling NAFTA the worst deal ever signed by the U.S. This being said with SUV and crossovers dominating sales in the U.S. auto market, automakers are moving production of smaller vehicles to Mexico, which provides them with cheaper labour as these vehicles do not have the profit margins to be produced in the U.S. at the same price point. This strategy could become politically more challenging, depending on what actually happens with NAFTA during the Trump administration over the next four years. But, we do know with the shift in the market toward SUVs, it’s going to increasingly be a money-losing proposition for the carmakers to build small vehicles in the US. So what happens if automakers cannot move the production of these low profit small vehicles to Mexico, well they will have to re-think their domestic assembly of passenger cars, which will drive prices for these cars up as production will decrease.
Analysts are predicting that U.S. auto sales will most likely stay on track with 2016’s record total sales of 17.5 million units, which is good news to the industry. But overall market instability, coupled with consumer fear about the future of the industry and product availability could bring on a decline in the industry, so all eyes will be on the first quarter sales to see if they are staying on pace with 2016’s numbers. Automakers are looking to see if Trump’s administration will give a break on higher fuel-economy standards set by the Corporate Average Fuel Economy (CAFE) which are supposed to rise substantially for automakers selling vehicles in the US by 2025, as the current mix of vehicles sold in the U.S. has shifted from small, fuel-efficient cars to big trucks and SUVs. These new CAFE goals are at odds with what people are actually buying. Plus with the sales of Electric and hybrid vehicles weak, it is becoming more difficult for automakers to produce these vehicles, to meet the CAFE goal. Who has the most to gain from the Trump’s administration in the auto industry; well it might just be the auto worker unions themselves. If the Big Three U.S. automakers have to expand domestically because it’s too difficult to establish manufacturing in Mexico, the jobs they create will be UAW jobs most likely in the upper Midwest. Time will tell of course, however, given that the U.S. auto industry has seen steady growth since President Obama won his second term, a Republican in the White House, particularly Trump, who opposes many of the global business agreements that have been made to see jobs move to Mexico could create some political tension with automakers, but at the same time ease some of the CAFE regulatory pressures.
24
SPOTLIGHT ON BUSINESS MAGAZINE • FEBRUARY 2017
Made with FlippingBook HTML5