Major automakers urge Trump administration: don't ditch NAFTA
President Trump has threatened to withdraw from NAFTA, which is heavily utilized by automakers that have production and supply chains spread across the three countries.
Global automakers on Monday urged the Trump administration not to terminate the North American Free Trade Agreement and expressed hope the United States, Canada and Mexico can successfully conclude a modernized and improved trade pact.
Fiat Chrysler Automobiles NV (FCA) Chief Executive Sergio Marchionne, who announced last week plans to shift heavy pickup truck production from Mexico to Michigan by 2020, said he hoped the Trump administration would "retune" some of its trade talk demands.
Trump has threatened to withdraw from NAFTA, which is heavily utilized by automakers that have production and supply chains spread across the three countries.
Marchionne, speaking at a news conference at the Detroit auto show, said FCA`s truck production shift in part "goes a long way I think in addressing some of President Trump`s concerns about the dislocation of production capacity out of the United States."
That decision reduces the risk those trucks would be hit with a 25 percent tariff if NAFTA unravels.
Ford Motor Co CEO Jim Hackett on Sunday told reporters NAFTA needs "to be modernized," adding that of Detroit`s Big Three automakers, Ford has the highest percentage of U.S.-built vehicles.
"We`ve got a big commitment to our country and it`s proven in the numbers," he said.
Unlike General Motors Co and FCA, Ford does not build trucks in Mexico.
GM CEO Mary Barra on Saturday expressed optimism NAFTA will survive with improvements. Other senior GM executives stood by the company`s plans to continue building trucks in Mexico.
MICHIGAN GOVERNOR PUSHES NAFTA
Michigan Governor Rick Snyder, a Republican, met with Vice President Mike Pence in December, urging the administration to improve NAFTA instead of terminating it, which could harm the auto industry.
"That would be a negative for all three countries," Snyder told reporters after touring the auto show.
Jose Munoz, head of North American operations for Nissan Motor Co, told Reuters the company has boosted U.S. production in recent years.
"No matter what the new NAFTA rules, we will adjust very fast so we can maximize our business," he said. "The more localized you are the less exposed you are to potential changes."
Under NAFTA, at least 62.5 percent of the material in a car or light truck made in the region must be from North America to be able to enter the marketplace tariff-free.
The Trump administration has proposed increasing that minimum NAFTA content to 85 percent, with 50 percent made in the United States.
The 85 percent North American content proposal to avoid tariffs is unworkable, Toyota North America Chief Executive Jim Lentz told Reuters.
"There`s not a vehicle that meets that,” he said.
Lentz said since NAFTA was agreed 14 auto plants have been built in the United States – eight by Toyota – and 11 in Mexico.
"It`s not like we are not investing in the United States," Lentz said.
Marchionne also said the 85 percent figure is not feasible. "I’m hopeful that we`ll see a more rational number going forward and if it is more rational, then I think we’ll be able meet the standard," he said.
A NAFTA breakup would raise costs, slow demand and put U.S. jobs in jeopardy, Lentz said.
Volkswagen AG brand CEO Herbert Diess said the automaker wasn`t preparing for NAFTA`s demise.
The U.S. auto industry has worked to convince the Trump administration of NAFTA`s importance. In October, major automakers, suppliers and auto dealers launched a coalition to back the agreement.
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