Auto dealer group voices support for NAFTA replacement
Detroit — The National Automobile Dealers Association on Tuesday threw its support beyond the proposed trade deal between Canada, Mexico and the United States.
Charlie Gilchrist, the chairman of the organization representing about 16,500 new-vehicle dealerships in the U.S., called for Congress to "expeditiously" pass the United State-Mexico-Canada trade agreement to replace the North American Free Trade Agreement.
As the auto industry faces the threat of more tariffs, the agreement would provide some protection for trade with the country's neighbors and help keep the U.S. industry competitive, he said.
"The U.S.-Mexico-Canada Agreement — better known as USMCA — that the president has negotiated will maintain auto production and distribution in North America," Gilchrist said on Tuesday before the Automotive Press Association at the Detroit Athletic Club. "It will preserve the global competitiveness of the U.S. automotive industry. And it will enable dealers to continue providing affordable vehicle options for American consumers."
Tariffs already have created disruption in the auto industry — along with slowing sales, autonomy, electrification and now a 23-day national strike by the United Auto Workers against General Motors Co. Despite sourcing an overwhelming majority of their steel from the United States, Ford Motor Co., and GM said aluminum and steel tariffs raised the costs of their raw materials by $1 billion in 2018.
And now, the Trump administration is threatening 25% levies on vehicles and auto parts in the name of national security. A decision is expected next month.
Such broad-based duties "would wreak havoc on our industry," Gilchrist said. A 25% tariff on all imported cars, trucks and parts would lead to the loss of 117,000 of the 1.1 million jobs at franchised dealership — about seven jobs per dealership, according to the Center for Automotive Research in Ann Arbor.
Still, Gilchrist maintained that he believes the "president understands the U.S. auto industry perfectly" and is using the threat as a negotiating tool, especially with China.
Gilchrist emphasized the global nature of auto manufacturing and how USMCA would provide the stability for which automakers are looking right now. The implementing legislation for the deal from President Donald Trump, who is embroiled in an impeachment investigation in the U.S. House, is being negotiated in Congress. Still, House Speaker Nancy Pelosi, D-California, said last week, "We are on the path to yes."
Gilchrist said he hopes to see its passage by November: "We're trying to not let it slip down the priority list."
Canada and Mexico supply U.S. auto manufacturing plants with more than $58 billion in motor vehicle parts, 48% of auto parts bought in the U.S. come from its neighbors and 25% of all new vehicles sold here come from Canada and Mexico — more than a third of which were from the Detroit Three, he said. Meanwhile, the U.S. sends more than 71% of its vehicle exports to either Canada or Mexico.
The ongoing strike against GM underscores this global nature. As a result of halted production lines in the United States, GM has furloughed more than 10,000 non-UAW employees in Mexico, Ohio and Ontario.
USMCA would increase to 75% from 62.5% the percentage of a car's parts that have to come from the U.S., Canada or Mexico to qualify for duty-free treatment. It also requires 40-45% of automobile parts be made by workers who earn at least $16 an hour by 2023.
Some labor leaders, including AFL-CIO President Richard Trumka, have criticized the deal for not doing enough to create shared prosperity for every worker.
A report earlier this year from the U.S. International Trade Commission predicted automakers would sell 140,000 fewer cars annually under the agreement. Still, the auto industry has supported it.
"We need to get that stability for our OEMs," Gilchrist said. "And I think this will create jobs in the United States, so that's why I think it's a good agreement."