He won’t be president for another 16 days, but the Donald Trump era officially arrived Tuesday for Detroit’s auto industry.
In just a few hours, the president-elect used Twitter to berate General Motors Co. for building Chevrolet Cruze hatchbacks in Mexico. He warned that models bound for the United States could be subject to “a big border tax” — a salvo GM deflected with a calm explanation that sidestepped the political potency of Trump’s charge.
Ford Motor Co. already got the message. As part of a sweeping announcement detailing the company’s vision for next-generation mobility, the Blue Oval said it is canceling plans to build a new assembly plant in Mexico. Trump openly criticized the plan throughout his campaign, even as senior Ford officials publicly defended the decision as recently as last month.
Instead, as part of a $4.5 billion investment in electrification and self-driving vehicles, Ford will invest $700 million in its Flat Rock Assembly Plant, create 700 jobs, establish a Manufacturing Innovation Center and produce electrified versions of its iconic F-150 pickup and Mustang sports car in Michigan.
The decisions are a political win for Trump and Vice President-elect Mike Pence, who were briefed separately by phone on Ford’s plans earlier Tuesday by Executive Chairman Bill Ford Jr. and CEO Mark Fields. Trump’s Build America rhetoric on the campaign trail powered his victory in the industrial Midwest, put American businesses like Ford and GM, Boeing Co. and Lockheed Martin Corp. on notice and could redraw the heartland electoral map to favor Republicans.
The moves should score points for Ford, too, as well as bolster Michigan’s claim to become the heart, brain and brawn of next-generation autonomous-vehicle business. How can it not be when the nation’s two largest automakers, GM and Ford, are expanding sharply their investments here in testing, development and production well into the next decade?
This is another huge step toward validating that claim with cold, hard results and billions in private-sector investment backed by strategic government support, especially at the state level. Suppliers with technical expertise operating in Michigan, as well as the planned American Center for Mobility at Willow Run, only bolster a credible case steadily making itself.
“It’s a doubling-down on Michigan as a high-tech space,” says a ranking industry executive close to the situation. “The decision was informed by the business and the market factors. Nobody” outside a small group of Ford and state officials “knew anything about this until this morning. There was no quid pro quo.”
But there was recognition at the highest levels of Ford that the evolving plan could address a complex web of issues at the same time: the decision to kill a $1.6 billion car plant at San Luis Potosi, Mexico, and consolidate Focus production at Hermosillo improves capacity utilization there. It also says Ford recognizes the decline in small car sales is real and likely to be lasting.
Second, the plan places a big bet on the hybrid electrification of such best-sellers as the F-150, the Mustang and the Transit Connect even as it pushes ahead with development and production of self-driving cars and trucks. This as the vast majority of revenue, profits and employment remain concentrated in the traditional car, SUV and truck business.
Third, it enables Michigan to make a legitimate play for leadership in autonomous vehicles while Silicon Valley is either talking about it, scaling back its ambitions or both. The state, for example, outpaces California in the number of autonomous testing sites and equals that of the entire nation of Japan, according to a recent study by the Ann Arbor-based Center for Automotive Research.
Fourth, Ford’s moves score a political trifecta with potential consumers and President-elect Trump before he even takes office: construction of the plant in Mexico is canceled; jobs are created and capital is reinvested in Ford’s ancestral home, whose voters helped Team Trump breach the so-called “Blue Wall”; and Ford makes a friend in a very high place.
Realities still intrude. Trump’s revival of his campaign-trail tariff threat, this time leveled against GM, is complicated by the fact that a sitting president cannot individually levy tariffs on a single company without congressional approval. It also would be complicated by the rigorous facts of the global auto industry today.
Rival automakers from Toyota Motor Corp. to Volkswagen AG’s VW and Audi brands (and more) assemble vehicles in Mexico and sell them in the United States. Would a Trump administration really move to punish a Detroit automaker while exempting its largest Japanese and German competitors from the same treatment?
Members of Congress, especially those in the president-elect’s own party, likely would resist. The auto industry, foreign and domestic, has deep roots in communities across the country, especially in the industrial Midwest and the South. Both generally backed Trump, and lawmakers in both are fiercely loyal to “their” automakers and their business concerns.
GM produces its new Cruze hatchback in Mexico and not in its Lordstown, Ohio, plant for at least two reasons. First, hatches are generally considered far more popular with consumers outside the United States than inside a country that gets SUVs in all their permutations far easier than its people get hatchbacks.
That’s why GM produces Cruzes in a country whose bilateral trade relationships enable GM to reach those markets more cost-effectively. Mexico has more such relationships than the United States does, a bipartisan dirty little secret that exacerbates the complexity of doing the global car business across borders.
Working his way through such inconvenient facts awaits the president-elect, proof that anyone who reaches the nation’s highest office has a learning curve. He will, too.
Daniel Howes’ column runs Tuesdays, Thursdays and Fridays. Follow him on Twitter @DanielHowes_TDN, listen to his Saturday podcasts, or catch him 3 and 10 p.m. Thursdays on Michigan Radio’s “Stateside,” 91.7 FM.