Sunday 30 April 2017

Detroit wants Trump along for the ride

The President-elect has already forced US car giants to reconsider shifting jobs to Mexico, but industry bosses are still keen to develop a close relationship, writes Keith Naughton

A model poses by a 2018 Audi S5 Cabriolet at the North American International Auto Show in Detroit
A model poses by a 2018 Audi S5 Cabriolet at the North American International Auto Show in Detroit

The way Bill Ford tells it, you'd think he and Donald Trump are like two old buddies chit-chatting all the time about cars, economics and taxes.

"When needed, I can always get to him or he calls me," Ford, the chairman of Ford Motor Company, said at the North American International Auto Show in Detroit. "I find that he's very accessible and very interested."

To the average American, the Trump-versus-Detroit saga seems like an awfully one-sided affair, with the President-elect berating auto executives and pressuring them into scaling back plans to shift jobs from the US to Mexico.

But the comments from Mr Ford, the great-grandson of founder Henry Ford, provide a window into another crucial aspect of the relationship: in exchange for submitting to the public cajoling, industry bosses are trying to forge a close relationship with the Trump administration and coax it into adopting much of their wish list.

It's a long list.

Here are some of the key elements that came up during day one of the auto show.

U.S. President-elect Donald Trump speaks during a press conference in Trump Tower, Manhattan, New York, U.S., January 11, 2017. REUTERS/Shannon Stapleton
U.S. President-elect Donald Trump speaks during a press conference in Trump Tower, Manhattan, New York, U.S., January 11, 2017. REUTERS/Shannon Stapleton

Fuel economy

There's no bigger issue for the industry than fuel economy and emissions.

Automakers are pushing for the Trump administration to allow them more latitude in meeting President Barack Obama's miles-per-gallon target of 50.8 mpg by 2025.

The standard was 35.3 mpg last year. General Motors Co. North America President Alan Batey expressed concern that the environmental regulations are forcing companies to add expensive equipment he says "the customer won't pay for and, in many cases, doesn't even value".

A longer timeline would relieve some of the pressure, he said.

Dietmar Exler, president and chief executive officer of Mercedes-Benz USA, said carmakers don't necessarily need lower fuel-economy and emissions standards, but he noted they have to satisfy different rules: one for California and other states that follow its lead and another for the rest of the US.

This complicates both planning and manufacturing, so the companies would like more uniform regulations, he said.

Corporate taxes

Volvo Car Group ceo Hakan Samuelsson is among the executives who talked about wanting to see Trump cut the US corporate tax rate, especially now that Volvo is substantially increasing its American presence by opening a new factory in South Carolina next year.

The current rate is 35pc; Trump's campaign plan was for 15pc.

"Being here as local citizens paying corporate taxes, of course, it's a drawback with it being on a very high level compared with other countries," he said.

GM's Batey and Ford ceo Mark Fields also mentioned lower taxes.

Trade

BMW wants Trump to maintain free trade with Mexico, said Ian Robertson, the German automaker's head of global sales and marketing.

The company plans to open a new factory there in 2019 to build its 3 Series sedan, which it will export all over the world.

BMW also is spending $1bn on its South Carolina plant to make more sport utility vehicles.

"The conditions for investment and for employment have worked very well for us, and we hope it stays that way," he said.

Ford, Fiat Chrysler and Toyota have made it clear they don't want to pay the additional tariffs Trump has threatened on Mexican-made vehicles exported to theUS.

Ford cancelled a proposed $1.6bn (€1.5bn) investment there, Fiat Chrysler said it will be able to shift output of a Ram pickup to Michigan from Mexico and Toyota said it plans to spend $10bn (€9.47bn) in the US in the next five years.Volvo doesn't want any limitations on trade because it needs "a global production structure" and "an exchange between factories," Samuelsson said.

"That's important for the US economy. It cannot be a closed market."

Infrastructure

Trump has pledged a spending binge that could total $1 trillion on water systems, bridges, roads and other infrastructure.

One part of his plan is particularly relevant to auto companies: incorporating "new technologies and innovations into our national transportation system" for "the next generation of vehicles" - which includes self-driving cars.

"If we want to make autonomous driving a reality, and you want to start getting to Level Five," roads will need "the right level of equipment," said Fiat Chrysler chief executive Officer Sergio Marchionne, referring to the ability of a car to drive itself without any level of human intervention.

This could include developing more precise mapping capability and artificial intelligence that understands sometimes erratic human behavior.

The Trump administration also could help by adopting regulations that apply to all 50 states for testing self-driving cars on open roads. Michigan already passed its own law.

"We'd love one set of rules," Mercedes's Exler said.

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