Business

Are Trump tweets changing plans for US automakers' factories?

The president-elect went after General Motors on Twitter hours before Ford, a frequent target of criticism by Trump, announced it would scrap its plans for a new plant in Mexico. 

General Motors CEO Mary Barra talks about the new 2016 Chevy Cruze vehicle at the Filmore Theater in Detroit, Michigan, June 24, 2015. Trump slammed General Motors' production of some Cruze compact cars in Mexico on Twitter Tuesday.
Rebecca Cook/Reuters
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The @realDonaldTrump was at it again Tuesday, threatening in 140 characters to impose a border tax on the Chevrolet Cruze cars General Motors manufactures in Mexico.

An early morning Twitter post sent GM shares on a 1 percent tumble before the market opened, although they rebounded to close up, at $35.15 by the end of Tuesday. 

The tweet came hours ahead of an announcement that Ford Motor Company has halted plans to build in Mexico a $1.6 billion assembly plant, a repeated target of Mr. Trump in his criticism of the North American Free Trade Agreement (NAFTA) between the United States, Mexico, and Canada. Instead, Ford said Tuesday it now plans to invest $700 million in a Michigan factory to build new electric, hybrid, and autonomous vehicles.

General Motors, the nation’s largest automaker, became the latest American manufacturer Tuesday caught in the crosshairs of Mr. Trump’s Twitter account. The president-elect has slammed Ford, United Technologies, The Boeing Company, and Lockheed Martin on social media since he was elected Nov. 8.

In doing so, Trump has already inserted himself into corporate affairs more than his predecessors in the White House, experts say. But it’s unclear how his direct criticism of one automaker, be it GM or Ford, could affect the industry as a whole. It’s unlikely one tweet will force a manufacturer to scrap months of planning, since any change in vehicle production would require a carmaker to build a brand new facility. But it could lead to different forms of rhetoric among those in Detroit, says Nathan Jensen, a professor at the University of Texas at Austin who has studied the relationship of businesses and governments.

A “company could think of ways to allow an administration to claim some credit for the opening of new factories,” Professor Jensen tells The Christian Science Monitor in a phone interivew.

Conversely, Ford and GM have each gone on the defensive against Trump.  

On Tuesday, an Android phone (an indication Trump may have authored the post himself) tweeted “General Motors is sending Mexican made model of Chevy Cruze to U.S. car dealers-tax free across boarder. Make in U.S.A. or pay big border tax!” 

The president-elect did not provide further details.

But General Motors promptly responded, publishing a brief statement on its website. The automaker said it manufactures the Cruze sedan in Lordstown, Ohio, and builds the hatchback version in Mexico “for global markets” “with a small number sold in the US.”

According to Automative News, GM began to produce the Cruze in Mexico last year, making 52,631 cars there. In comparison, it built 319,536 of them in the US. Previous versions of the Cruze sold in Mexico were made in a GM facility in South Korea.

“In this case, the tweet was specific to General Motors,” said Trump transition team spokesman and incoming press secretary Sean Spicer. “But I think you've seen an overall philosophy during the campaign and since he was elected to stand up for American workers and make sure that American companies don't benefit from moving their companies overseas and leaving American workers behind.”

Trump’s tweet also came hours ahead of Ford’s announcement it would cancel its plans for the $1.6 billion factory in Mexico in favor of a $700 million factory in Michigan.

Ford chief executive Mark Fields said the decision to cancel the new plant was, in part, related to the company’s need to “fully utilize capacity at existing facilities” amid declining sales of small and medium-sized cars such as the Focus and Fusion. Mr. Fields also endorsed “pro growth” tax and regulatory policies expected under the Trump administration and a Republican Congress. But a Ford source told Reuters the company’s decision was directly influenced by Trump’s policy goals such as lowering taxes and regulations.

During his presidential campaign, Trump pledged that, if elected, he would not allow Ford to build the assembly plant in Mexico. He said Ford’s plan was an “absolute disgrace,” and threatened to slap a tariff of 35 percent on imported Ford cars. But Ford’s actions appear to be as much about the shifting auto market as policies under Trump.

Small-car sales have been hurt by shifting consumer demands and low gas prices. In fact, a trend among Detroit’s Big Three automakers has been to produce smaller cars in Mexico while taking advantage of higher-paid US workers to build more profitable, trucks, SUVs and luxury cars. Dr. Jensen at the University of Texas at Austin related Ford’s announcement to company’s relationships with governors.

In a 2013 paper, Jensen and his colleagues published findings from a nationwide internet survey that suggested that a firm crediting a governor with its expansion can be politically beneficial to a governor's future campaign to remain in office.

"Our findings illustrate a critical political benefit of offering such [tax] incentives," they write in the abstract. "Politicians can use these incentives to take credit for investment flowing into their districts and to minimize the political fallout when investors choose to locate elsewhere."

Trump has also inserted himself into the aircraft manufacturing industry, sending company’s stocks briefly dropping in the process. In December, he attacked Boeing on Twitter for what he alleged were excessive costs to build two different Air Force One planes. Trump also twice used Twitter to slam Lockheed Martin’s development of the F-35, saying he asked Boeing to price-out a comparable F-18 Super Hornet “based on the tremendous cost and cost overruns” of the F-35.

But the Monitor’s Laurent Belsie warned that Trump’s intervention in corporate affairs could backfire.

Trump runs several risks by taking so personal a role in intervening in the economy. Like Obama and all presidents before him, Trump’s reputation will rest, at least in part, on the future direction of the economy. If it grows, his deals – while criticized and praised now along mostly party lines – will look prescient; if the economy falters, they will be viewed as failure

This report contains material from Reuters.