Carmakers to Trump: Pump brakes on tariffs

Keith Laing
The Detroit News
In this January 2017 photo, cars are parked waiting to be exported at Yokohama port near Tokyo. Japan’s government has warned in a report that a higher U.S. tariff on auto imports could backfire, jeopardizing hundreds of thousands of American jobs created by Japanese auto-related companies, raising prices for U.S. consumers and devastating the U.S. and global economy.

Washington — The auto industry is unified in its opposition to the Trump administration's proposal to impose tariffs as high as 25 percent on imported cars, but leaders fear the message is likely not to be heeded.

Groups that lobby for both Detroit manufacturers and their foreign counterparts will testify at a public comment hearing organized by the U.S. Commerce Department on Thursday, which is considering the duties under the guise of national security. The agency received 2,356 written comments — mostly negative — that included submissions from General Motors Co. and Toyota Motor Co.

On Tuesday, a group of seven lobbying groups representing various segments of the auto industry released a letter to President Donald Trump that urged him to reverse course. The letter is a rare show of industry-wide unity. 

"We have come together as a united U.S. auto industry — domestic and international automobile manufacturers, suppliers, dealers and auto care businesses — to urge your Administration to achieve fair trade through policies that won't jeopardize American jobs, our economy or U.S. technological leadership," the letter said. 

"Raising tariffs on autos and auto parts would be a massive tax on consumers who buy or service their vehicles — whether imported or domestically produced," the groups continued. "These higher costs will inevitably lead to declining sales and the loss of American jobs, as well as increasing vehicle service and repair costs that may result in consumers delaying critical vehicle maintenance." 

The letter was signed by the Alliance of Automotive Manufacturers, which represents foreign and domestic car manufacturers; American Automotive Policy Council, which lobbies for Detroit manufacturers; the Auto Care Association, which represents independent manufacturers, distributors, repair shops, marketers and retailers; American International Automobile Dealers Association, which represents dealerships for foreign cars; the Association of Global Automakers, which represents international manufacturers; the Motor and Equipment Manufacturers Association, which represents part manufacturers; and the National Automobile Dealers Association.

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The groups are scheduled to testify Thursday. They will be joined by representatives from Volkswagen, Hyundai, the United Auto Workers union and ambassadors from the European Union, Mexico, Canada, Turkey, Japan, South Korea, Malaysia and South Africa. 

In the hopes of spurring Congress to take action to block the implementation of import tariffs, the Association of Global Automakers is planning a "drive-in" Thursday in which domestic workers at foreign-owned plants will drive cars they build to Capitol Hill to draw attention to the potential negative impact of tariffs. The auto workers will be joined by U.S. Sen. Doug Jones, D-Ala., and U.S. Reps. Drew Ferguson, R-Ga., and Jackie Walorski, R-Ind. 

Brian Krinock, senior vice president of vehicle plants for Toyota Motor North America, said Tuesday that a 25 percent tariff on finished vehicles or components would add as much as $3,000 to the price of some its best-selling U.S. models. 

"If we were to look at the Camry, about 30 percent of the parts inside the Camry are from somewhere else other than the U.S.," he said. "The cost would be $1,800 that would be impacted. If we look at Toyota Sienna, America's family van, about $3,000. That's made in Princeton, Indiana. If we also look our Tundra pickup truck, made in San Antonio, Texas, the cost would be $2,800." 

Krinock said the impact of tariffs would not be limited to Toyota, or even foreign-owned manufacturers.  

"I can say this that there's no automaker that has 100 percent exclusive in the U.S. source parts," he said. "It is a global business and global operations."  

Detroit manufacturers have warned the Trump administration that tariffs could expose them to retaliation from the home countries of foreign-owned competitors and put jobs of U.S. autoworkers at risk.

In comments submitted to the Commerce Department in late June, GM warned: “If import tariffs on automobiles are not tailored to specifically advance the objectives of the economic and national security goals of the United States, increased import tariffs could lead to a smaller GM, a reduced presence at home and abroad for this iconic American company, and risk less — not more — U.S. jobs.”

Most foreign-owned automakers have been reticent to release information about the potential impact of tariffs on their price of cars in the U.S. showrooms, but have argued that domestic jobs in plants typically located in states that carried Trump to the presidency could be put in risk. 

Hyundai, which builds the Elantra, Sonata and Santa Fe in Alabama, noted in a statement provided to The Detroit News on Tuesday that it "has a significant manufacturing presence in Alabama, and its U.S. operations and associated suppliers have created more than 25,000 American jobs and invested more than $8.3 billion in the United States." The South Korean company noted its domestic dealerships have also created  47,000 U.S. jobs. 

"Free and fair trade makes the United States a competitive market place," Hyundai said. "Broad restrictions, such as tariffs, on auto and auto part imports will raise costs for American consumers and families." 

Mazda, which has announced plans to build a $1.6 billion joint assembly manufacturing plant with Toyota in the U.S. that could open in 2021, said in comments submitted to the Commerce Department that tariffs would force it to reassess U.S. manufacturing plans and its ability to maintain a robust domestic dealer network.

Volkswagen said in a Tuesday statement it "has made significant long-term investments in the United States that would be impaired by restrictive changes to trade including the proposed tariff on automotive imports from the European Union.

"We believe that tariffs of this kind are a tax on the U.S. consumer and will result in higher prices and also threaten job growth," the German automaker said. "In addition, the potential for escalating trade retaliation presents a serious risk to economic growth in all countries." 

John Bozzella, the global automaker group's president, said Tuesday he has never seen the auto industry this united.

"You cannot find a company that has asked for this protection," he said. "You cannot find a group of employees that has been loud and strident and forceful in a request for protection. I don’t see it anywhere." 

Chad P. Bown, senior fellow at the Peterson Institute for International Economics, a nonpartisan think tank, said the industry's united front may fall on deaf ears. He cited the the Trump administration's decision to impose tariffs on foreign steel and aluminum. 

"This may make no impact on the administration whatsoever," Bown said. "As we saw in the aluminum case, the aluminum industry came out against it."

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Twitter: @Keith_Laing