Image: AP Images

Following a meeting with President Trump on Tuesday, Volkswagen CEO Herbert Diess gave a public run through of the company’s potential options for increasing American-based automotive production. Chief among the day’s talking points, Volkswagen’s alliance with Ford and a potential use of the Blue Oval’s U.S. plants to build cars.

Volkswagen and Ford announced a strategic alliance back in June. It’s been progressing slowly, but both manufacturers were optimistic as talks continued through October. While nothing is set in stone yet, both the German and American manufacturers expect to make progress on the deal in January. As of now, it does not appear that either company would take any stake in the other.

Diess also noted that the company was “considering building a second car plant” in the U.S. market. This would be in addition to the company’s Chattanooga, TN plant which produces the Passat and Atlas models. Given the fact that GM is closing a few of its automotive production facilities, perhaps VW could step into one of those, netting some serious good will points with the local workforce.

The third option would be an increase in automotive production capacity at the company’s existing Tennessee plant. This would preclude Volkswagen from needing to negotiate with the United Auto Workers. Were Volkswagen to produce cars in a Ford plant, a shuttered GM plant, or a potential future VW plant, collective bargaining would certainly be part of the discussion. Thus far workers have been unable to unionize in VW’s lone stateside plant.

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It would seem to me that Diess was saying things the President might enjoy hearing, perhaps without any actual immediate plan for follow through. When Automotive News reached Bill Ford for comment, he stated “We haven’t gotten that granular in our talks yet, but clearly we are talking with them [Volkswagen].” By perhaps placating Trump with promises of future U.S. jobs, it is likely Diess was hoping to side step or waylay the import tariffs the president has tweeted about.

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Volkswagen was joined in Washington at the request of the White House by Daimler AG CEO Dieter Zetsche and BMW CFO Nicolas Peter. BMW and Daimler in particular are afraid of retaliatory tariffs on the cars and SUVs they build in the U.S. which are frequently exported to China. VW, meanwhile, would take a huge profit hit if Trump’s proposed 25% EU importation tariff were to be implemented.

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Trump and his supporters are concerned about the trade imbalance we experience with other nations. I have a serious trade imbalance with my local grocery store, but that doesn’t mean my life would improve by growing my own potatoes. Macroeconomics is a tough subject, folks.

[Source: Bloomberg]