Most of our staff is off today for the MLK Jr. Day holiday, but I’m here with Morning Shift and our intrepid weekend editor Alanis King is at the helm the rest of the day.
1st Gear: BMW Says ‘Si’ To Mexico
Automakers and other companies have been in the process of reevaluating their plant location strategies, or at least strongly and publicly playing up U.S. investments they were making anyway, in the wake of tariff threats from incoming President Donald Trump. Build here or get hit with harsh tariffs if you want to sell here, Trump says, which for automakers serving multiple international markets is easier said than done.
His latest target is BMW, which is planning a big new factory to open in 2019 to build the 3 Series. This plant will supplement global 3 Series production in Germany and China. But here’s what Trump had to say about that in an interview with Germany’s Bild and reported by Reuters:
In an interview with German newspaper Bild, published on Monday, Trump criticized German carmakers such as BMW, Daimler and Volkswagen for failing to produce more cars on U.S. soil.
“If you want to build cars in the world, then I wish you all the best. You can build cars for the United States, but for every car that comes to the USA, you will pay 35 percent tax,” Trump said in remarks translated into German.
“I would tell BMW that if you are building a factory in Mexico and plan to sell cars to the USA, without a 35 percent tax, then you can forget that,” Trump said.
As that story points out, BMW’s an odd target for a foreign carmaker, because it makes a ton of cars here in the U.S. already; all of its X crossover models are built in South Carolina, something around 360,000 cars a year and growing.
However, a BMW executive said the company is committed to opening its plant in 2019, despite this being no idle threat from the president-elect:
“The president’s powers are considerable. He can legally impose tariffs of up to 15 percent for 150 days. Trump is not constrained by Congress,” said Simon Evenett, professor of international trade at Switzerland’s University of St Gallen.
“Even if foreign companies object and seek to challenge the legality of tariffs, it will take at least 18 months to get decided. Corporate strategies will be disrupted by then.”
2nd Gear: No ‘Reciprocity’
One more thing on this topic: from that same Reuters story, Trump seems miffed that other markets like Germany and Japan aren’t buying U.S. cars at the same rate we are buying theirs.
Trump called Germany a great car producer, saying Mercedes-Benz cars were a frequent sight in New York, but claimed there was not enough reciprocity. Germans were not buying Chevrolets at the same rate, he said, calling the business relationship an unfair one-way street.
Chevrolet sales have fallen sharply in Europe since parent company General Motors (GM.N) in 2013 said it would drop the Chevrolet brand in Europe by the end of 2015. Since then, GM has focused instead on promoting its Opel and Vauxhall marques.
Again, I don’t think he understands that cars from various marques are produced globally including here in America like the BMW X cars, or that places like Japan have been relatively closed markets forever (although he’s hardly the first person to complain about that), or that modern Buicks are pretty much just Opels to use one example, or that, let’s be brutally honest, for a couple decades many U.S.-made cars were not competitive with many foreign imports! But I’ll let you unpack the whole thing.
3rd Gear: The Ford Kuga Keeps Blowing Up
Okay, on to a more pleasant topic: exploding cars. The Ford Kuga, which we call the Escape, is getting recalled in South Africa over nearly 40 incidents of fire, reports Reuters:
U.S. auto-maker Ford (F.N) will recall 4,500 of its Kuga SUV models after dozens of reports of the vehicles catching fire spontaneously, the head of the company’s South Africa unit said on Monday.
In a joint statement with the National Consumer Commission, Ford’s Southern Africa President and chief executive Jeff Nemeth said the company could confirm 39 incidents of the cars catching fire, as well as one death, which Nemeth said was not directly linked to the defect.
No word on whether this affects U.S.-market cars or not yet.
4th Gear: Keep Detroit Frosty
I certainly enjoyed the Detroit Auto Show, even though as a Texan it means the most brutally uncomfortable cold I’ll feel all year. Much like August here in Austin, no one in Michigan seems happy with the situation either! So there are renewed calls, as there often are, to move North America’s biggest auto show to something temperate, like May.
Over at the Detroit Free Press, critic Mark Phelan outlines the reasons not to move the show, from not messing with the $450 million it pumps into the local economy to this:
The Detroit auto show got its spot on the calendar after years of negotiating and politicking with OICA, the international group that decides which auto shows get coveted international status. Leaders of the Detroit Auto Dealers Association (DADA) travel to automaker headquarters and other auto shows throughout the year to secure the high-profile vehicle unveilings that draw the media attention automakers crave.
“We’re one of the top three auto shows in the world, and the timing is an important part of that,” DADA executive director Rod Alberts said. “We pride ourselves on being the first major auto show of the year. Automakers like that.”
They also like to sell cars, and that’s why the auto show has been in January for decades, even before it gained international standing in 1989.
“January is the slowest time of the year for selling cars,” Alberts said. “The excitement of going to the show and the media coverage of new vehicles brings customers to dealers.”
It’s a nice idea, not freezing half to death, but I doubt a move will ever actually happen.
5th Gear: But They Are Moving It Forward Just A Little
This won’t fix the weather complaints, but the Detroit show will be bumped forward on the calendar by a week in 2018. Organizers say it’s a “coincidence” but if they hadn’t moved it would have run up against CES, the tech trade show that has stolen a lot of the Detroit show’s product reveal thunder in recent years. From The Detroit News:
Organizers of the Las Vegas show moved the date of next year’s show to Jan. 9-12 — the same period of time that press preview days for the Detroit show typically have been held. That would have caused many auto execs and those covering them to decide which show to attend.
Instead, the 2018 Detroit auto show will move a week later on the calendar, with press days Jan. 14-16. That coincides with Martin Luther King Jr. Day, traditionally a holiday for the United Auto Workers and Detroit automakers.
NAIAS spokesman Max Muncey said the change of dates was a coincidence and the Detroit auto show “doesn’t feel pressure” from CES.
Rod Alberts, executive director of the Detroit auto show, said: “We actually have to schedule all this well in advance with Cobo Hall given the fact we have three months we’re in this building.” He said Detroit show organizers have not talked with CES about the dates. Of the King holiday timing, he said, “I don’t think it’s going to be an issue.”
Reverse: Ennis Cosby Murdered On Highway
Neutral: What Do Automakers Do About Trump?
I still think there’s a very strong chance that U.S. lawmakers with auto plants in their districts, spurred by lobbying money, will work to fight the tariff thing. But if not, do automakers build in the U.S. for the U.S., put up with a possible tariff or take another strategy?