Car companies, parts makers urge US to abandon tariff plan

Operations at a BMW plant in South Carolina. (Bloomberg pic)

SOUTHFIELD: Canadian auto parts maker Magna International Inc. has joined a chorus of automotive companies urging the US not to impose tariffs on their products.

The proposed tariffs would negatively affect both the US and Canada, cut jobs, and raise prices for consumers, Magna, among the largest automotive suppliers in the US, said in a letter to US Commerce Secretary Wilbur Ross dated June 29 and posted online.

“Tariffs or other trade barriers on imported automobiles and/or automotive parts would weaken the US economy and threaten to undermine the entire US automotive industry,” wrote James Tobin, Magna’s chief marketing officer.

The Ontario-based company joined General Motors Co., Germany’s BMW AG, and Hyundai Motor Co. of South Korea in pressing their case to the Commerce Department. They join the European Union, which warned last month of a “severe disruption” including the potential loss of some 180,000 US jobs. A top aide to President Donald Trump on Saturday dismissed the concerns as “smoke and mirrors.”

“It appears that the purpose of threatening to impose these duties is to achieve certain economic objectives, under the theory that enhancing US economic competitiveness will enhance US national security,” BMW said in a letter to Commerce Secretary Wilbur Ross. The Munich-based luxury automaker said its investment of almost $9 billion in the Spartanburg, South Carolina, BMW plant, supports more than 120,000 US jobs.

North Korea card
Hyundai said the duties would be “devastating” to the Seoul-based automaker and jeopardize its plans to expand manufacturing in the US In comments to the Commerce Department, it also said weakening South Korea’s Hyundai would ultimately hurt Trump’s effort to halt North Korea’s nuclear ambitions.

White House trade adviser Peter Navarro earlier addressed Friday’s stern warning by GM to the Trump administration that it could shrink US operations and cut jobs if tariffs are broadly applied to imported vehicles and auto parts.

“Increased import tariffs could lead to a smaller GM, a reduced presence at home and risk less — not more — US jobs,” the nation’s largest automaker said in comments submitted Friday to the Commerce Department.

Blunt statement
That such a blunt statement came from GM — a company run by a CEO, Mary Barra, whose normal tack is to avoid the political fray and let trade groups address the president’s policies — was surprising to industry observers. And it underscored how high she, and many industrial leaders, believe the stakes are as the president sinks the US into tit-for-tat trade squabbles across the globe. GM’s public pronouncement follows similar moves by Harley-Davidson Inc., Toyota Motor Corp. and Daimler AG.

The “comment suggests how severe the impact would be to GM, its employees and consumers,” said Michelle Krebs, analyst with AutoTrader.com. “There is a lot at stake for GM, the auto industry and the overall economy.”

Navarro shot back at GM on Saturday in an interview on CNN, saying the auto company was using “smoke and mirrors” to deceive the public. He said the impact of tariffs on the price of a GM car was equivalent to “a luxury floor mat.”

Foreign content
“Even the GM cars built here, about half the content is foreign,” Navarro said, adding that US factories had become “assembly plants” stitching together components made elsewhere. In the case of BMW’s massive South Carolina operation, that would be about 1,900 vehicles each day, many of which are exported.

Navarro added that Trump, having passed a tax cut that helps companies like GM and Harley, “felt betrayed” when they then threatened to move production jobs outside the US in response to the retaliatory actions of foreign countries to Trump’s tariffs.

In an interview with Maria Bartiromo that aired Sunday morning on Fox News’s “Sunday Morning Futures,” Trump said his political supporters are a close mirror of Harley’s customer base — and they are unhappy with any plan to expand overseas production. “Harley is an American bike” and “they should build them in this country,” he said.

The European Union warned that the introduction of US tariffs on EU autos and car parts could affect $300 billion in trade, and “would be met with equivalent penalties” imposed by the trading partners affected, according to a European Commission memo obtained by Bloomberg last month.

The trade barrier could result in “upwards of 180,000 jobs lost” in the US and the impact could be doubled by countermeasures, the EU said in the memo.

Trump ordered an investigation of whether auto imports pose national security risks last month under a section of the same 1960s trade law used to impose levies on steel and aluminium. The administration is said to be considering auto tariffs of as much as 25%.

Political advantage
In Sunday’s interview with Fox, Trump said the tariffs are needed in part because of the European Union’s barriers to US-built vehicles. “The European Union is possibly as bad as China, just smaller,” Trump said. “They send a Mercedes in, we can’t send our cars in.”

Trump also suggested the threat of taxing cars and parts from Mexico would be key leverage in finalizing a Nafta agreement.

Trump told reporters aboard Air Force One on Friday afternoon that he expected the Commerce Department to complete the investigation “in three or four weeks.”

Under the trade statute, Ross has until February to conclude the inquiry. But people familiar with the matter said Trump wants the investigation to be finished before the midterm elections in November so he can use the tariffs to his political advantage.

The probe has raised alarm among manufacturers, parts suppliers and auto retailers because all major carmakers — including GM and Ford Motor Co. — import a substantial share of the vehicles they sell in the US from other countries. Levies on parts also would have major implications for top models like the Ford F-150 pickup and Toyota Camry sedan by boosting prices by thousands of dollars.

GM fell 2.8% — to $39.40 — in New York on Friday, and has now posted three straight weekly declines, the longest such streak since March.

GM’s message came as a surprise because the company has kept close contact with the Trump administration, James Albertine, analyst with Consumer’s Edge Research told Bloomberg TV.

“So this came as a little bit of a shock to us,” he said, “as we thought they were working more along the lines of making sure the administration knows the severity of the impact tariffs would have.”

Barra had earlier tried to stay on good terms with Trump. She continued to serve on his Strategic and Policy Forum even after many other CEOs, such as Walt Disney’s Bob Iger and Tesla’s Elon Musk, quit to protest Trump’s withdrawal from the Paris climate agreement last year. The forum was disbanded in August following Trump’s tepid response to attacks by white supremacists in Charlottesville, Virginia.

Sales crimped?
Now, the Detroit-based maker of Chevrolet, Cadillac, Buick and GMC vehicles is warning that additional tariffs — on top of those recently slapped on steel,aluminium and Chinese products — could hurt GM and ultimately its customers. Higher prices would crimp sales, particularly to less-affluent consumers, and reduce the number of factory workers needed, it said.

If GM were to try to absorb the additional costs, it would have less money to invest in popular vehicles that sustain manufacturing jobs, or toward pivotal technologies including electric and self-driving cars.

“The threat of steep tariffs on vehicle and auto component imports risks undermining GM’s competitiveness against foreign auto producers by erecting broad brush trade barriers that increase our global costs, remove a key means of competing with manufacturers in lower-wage countries, and promote a trade environment in which we could be retaliated against in other markets,” the company said.

Chevy blazer
GM’s Chevrolet Silverado pickup was the top-selling model imported from Mexico last year, while the Chevrolet Equinox crossover was the leading vehicle sourced from Canada, according to LMC Automotive.

Just last week, GM announced plans to bring back the Chevy Blazer SUV later this year. The iconic American brand will be built at a plant in Mexico, a move that sparked angry comments from the United Auto Workers union. In its response, the UAW said that GM sells 80% of its Mexican-made vehicles in the US.

“GM imports a lot of pickup trucks from Mexico, so it’s a huge issue,” Alan Baum, an auto analyst in West Bloomfield, Michigan, said. “And for parts, it’s not just GM. Everyone imports a lot of electronics from Asia. Those are high-value parts.”