North America's automotive Big-Three – GM, Ford and Fiat Chrysler – mostly cheered after a breakfast meeting with President Trump at the White House last week.
The new President offered reduced corporate taxes, a slashing of red-tape and a major diversion from the Obama administration’s tough environmental regulations which are costing vehicle manufacturers billions of dollars. Some interpreted this as a ‘make-good’ from his previous hard-line stance against North American automotive companies who he criticised for shifting production offshore and importing new cars and components.
Analysts say the new manufacturing regime could provide funding for up to 400,000 new vehicle manufacturing jobs.
But – echoing his ‘America First’ ethos – before the meeting, President Trump tweeted: “I want new plants to be built here for new cars sold here.”
The reality is, with demand for new vehicles in North America backtracking a little after seven years of growth, the last thing the industry needs is new plants as most are currently running at about 85 per-cent of their capacity. In fact since the GM and Chrysler bankruptcies (part of a $US70 billion Government bailout), more than 100 vehicle and component plants have been shuttered to address the massive overcapacity which crippled the North American industry.
While GM opened a new plant in Michigan in 2006 (it makes SUVs – the Chevrolet Traverse, GMC Acadia and Buick Enclave) in recent times only Germany’s Volkswagen and Japan’s Toyota have opened new vehicle manufacturing plants in North America. Ford announced a couple of weeks back that production of the all-new Focus will now be in the US and its planned new plant in Mexico will not go ahead.
The Trump administration’s ‘Border Tax’ may be a conduit for more right-hand-drive vehicles made in North America and exported to markets like Australia. While details are yet to be fully outlined, in a nutshell, vehicles made in North America and exported for international sale would be eligible for a tax reduction while those imported from foreign plants like Mexico (or made with imported components) will be liable to an import tariff – that would add about $1,000 to the price of the current Toyota Camry made in the USA