President-elect Donald Trump took aim at the U.S. auto industry Tuesday as he continued an intervention into corporate America that aims to bolster job growth but is also vulnerable to exaggerations and oversimplifications.
On Twitter on Tuesday morning, Trump singled out General Motors for assembling some of its Chevrolet Cruze models in Mexico and selling them in the United States, reiterating his threat to impose punitive tariffs on imports. Shortly afterward, Trump celebrated an announcement by Ford that it was canceling a $1.6 billion factory in Mexico and using some of the money to expand production in Michigan.
“Instead of driving jobs and wealth away, AMERICA will become the world's great magnet for INNOVATION & JOB CREATION,” Trump tweeted.
"The automotive industry has always been a symbol for the status and health of manufacturing as a whole in the U.S.,” said Jeremy Acevedo, a senior analyst for Edmunds.com. “If Trump can demonstrate that he influenced a company like Ford or GM to make a business decision in support of his 'pro-growth' strategy, his likely hope is that it could have a domino effect to pressure other companies and industries to follow suit.”
But the business decisions that Trump has criticized and the deals he has trumpeted are not so straightforward. After his election win, Trump touted a deal to save jobs at a furnace factory in Indiana but inflated the number of jobs preserved. He later claimed credit for a big Japanese investment in the U.S. economy that was in the offing well before his election.
On Tuesday, in his tweet about GM — whose chief executive Mary Barra sits on Trump’s jobs council — Trump attacked the automaker for selling Chevrolet Cruzes assembled in Mexico to U.S. car dealers, warned that the company should “make in the U.S.A. or pay big border tax!”
But almost all of the 190,000 Cruzes sold in the United States last year were made at a factory in Lordstown, Ohio, the company said. Last year, GM introduced a hatchback model that is made in Mexico and is largely sold in international markets.
GM spokesman Pat Morrissey said the hatchback was available in the United States but that only 4,500 were sold here. GM sold 25,000 Cruze hatchbacks outside the country.
“The hatchback is a very small volume vehicle,” Morrissey said. “There’s just not a lot of demand for it.”
The Cruze sedan manufactured in Ohio has suffered from weak demand as well. In November, GM announced it would eliminate the factory’s third shift, cutting 1,245 salaried and hourly workers in the process. The jobs will end this quarter. The plant currently employs about 4,500.
“We are not reducing a shift based on quality or performance,” wrote Scott Brubaker, chairman of United Auto Workers Local 1714, one of the two that represent the factory, in a message to members posted on the union Web site. “Unfortunately, the market dictates our livelihoods and this is a business that changes based on consumer demand.”
Meanwhile, Ford’s decision to abandon a new factory in Mexico was not a unilateral victory for Trump’s nascent administration. The president-elect had criticized Ford during his campaign for shifting production of the Focus to the new facility south of the border. On Tuesday, Ford announced that it would invest a little less than half the money saved from cancelling that project into producing electric and self-driving vehicles at facilities in Michigan and Illinois.
The Michigan plant alone employs about 3,500 workers, and Ford said their jobs will stay in place. The decision is also expected to create about 700 U.S. jobs, and Ford Chief Executive Mark Fields called it a “vote of confidence” in Trump’s economic agenda in an interview on Fox Business News.
However, the production of the Ford Focus will not return to America. Ford said demand for small vehicles has waned considerably in the U.S. in recent years as low fuel costs make SUVs and trucks more palatable to consumers. Ford determined that the new plant in San Luis Potosi, Mexico, was no longer necessary and instead would shift production of the Ford Focus to an existing factory in Hermosillo, Mexico, said Joseph Hinrichs, president of Ford in the Americas.
The change in plans was made recently and without consulting people connected to Trump, Hinrichs said. Ford Executive Chairman Bill Ford shared the news with Trump in a phone call Tuesday morning, though the details of that call were not immediately available.
“When it’s a close judgment call, maybe people are tilting more toward the side of U.S. production, not necessarily because they anticipate any specific policy change but because they don’t know what the policy environment is going to be like and they’re afraid to find out,” said Alan Cole, an economist at the Tax Foundation.
Under the North American Free Trade Agreement, the United States does not impose tariffs on products imported from Mexico and Canada, but renegotiating the long-standing treaty was one of Trump’s key campaign promises. Since his election, he has attempted to claim credit for saving or creating thousands of U.S. jobs, but the details of the deals were more complex.
Trump boasted that telecom giant Sprint was bringing back 5,000 American jobs. Instead, the company is working with third-party vendors who manage its call centers to move work to the United States. Trump claimed he had stopped Ford from moving a Kentucky plant to Mexico. The automaker said it had never planned to shut down the factory but replace production of the Lincoln MKC with more Ford Escapes. And after Trump announced that more than 1,000 jobs would remain in Indiana, workers at the Carrier plant there found out the actual number was closer to 800.
Trump’s tweet Tuesday about GM does not make clear whether he is calling for targeted tax to punish individual companies that shift production out of the United States or for a blanket tariff on imports. Trump has repeatedly called for slapping a 35 percent tariff on Mexican products, but there is no framework for a broad-based border tax in his proposal to overhaul the corporate tax code.
“It's not just about one particular company,” Trump spokesman Sean Spicer told reporters. “I think he generally made it very clear he wants to bring American jobs home.”
House Speaker Rep. Paul Ryan has put forth a plan that would fundamentally restructure the way the federal government taxes businesses both at home and abroad. That proposal would allow companies to deduct the cost of goods made in America and sold in other countries. However, businesses that import products for sale in the United States would not be able to deduct that cost. Still, it remains unclear whether such measures would be violate World Trade Organization rules.
In Mexico, authorities expressed concern about Ford’s decision to cancel its project in San Luis Potosi, a state in northern Mexico which has become a hub for the auto industry.
The Mexican government said in a statement that it “regrets the decision of Ford Motor Company to cancel the investment project” and has been assured that the company will replace “any expenditures made by the state government” that facilitated the investment.
“The jobs generated in Mexico have contributed to maintaining manufacturing jobs in the United States, which otherwise would have disappeared due to Asian competition,” the statement read.
The president of the Employers Confederation of the Mexican Republic (COPARMEX) in San Luis Potosi, Jaime Chalita Zarur, described Ford’s decision as “very bad news for San Luis Potosi and for Mexico” which is the fault of the “pressure from the president-elect of the United States,” according to a local newspaper, El Sol de San Luis.
Staff writer Joshua Partlow in Mexico City contributed to this report.