Sunday, 22 January 2017
Automakers begin to mull the Trump effect
As UK Prime Minister, Teresa May, become the first foreign leader to meet new US President Donald Trump, focus will be on trade. And trade with Trump will be the one notion that senior executives in the global automotive industry this weekend will be the mulling the implication of Trump’s inauguration.For sure, his appointment will carry wide-ranging implications, not least for automakers with plants in Mexico. Not the least of these will be the extra work for front-of-office staff who have to work through the financial impact as facts unfold. Especially will this be so for those responsible for working out new transfer pricing strategies.
In 1910, Daimler and Renault were the first to establish automotive operations in Mexico. They were short-lived. Today, Fiat Chrysler Automotive has three plants, Ford Motor Company has three, General Motors four, Mazda Motor Company one, Honda Motor Company two, Nissan Motor Company three, Toyota Motor Company one (with another at Baja expected) and Volkswagen AG two.
In trucks, Daimler’s name can still be linked to Mexico. Daimler AG claims to be the largest truck and tractor truck manufacturer in North America. In Mexico, Daimler Trucks (pictured below) has two manufacturing plants located in Santiago Tianguistenco, State of Mexico, and in Saltillo, Coahuila; plus an International Parts Distribution Centre in San Luis Potosí, an engine and components remanufacturing plant in Toluca, State of Mexico, and a dealer network comprised of more than 83 sales and service points nationwide.
Daimler claims that its TMPs (Truck Manufacturing Plants) are responsible of more than 50 per cent of the total truck and tractor truck production in Mexico. Daimler Trucks Mexico employ.
And it must not be forgotten, that of Ford Motor Company's operations in Mexico, not the least of these is the Chihuahua Engine Plant which makes the 6.7-itre Power Stroke engine for class-leading F-150 pick-up trucks.
It is hardly surprising that Mexico will be top of any agenda set to be discussed around Europe tomorrow (Monday).
And these automakers will be joined in 2019 by BMW. Prior to his inauguration, Trump warned that the United States will impose a border tax of 35 per cent on cars that German carmaker BMW plans to build at a new plant in Mexico and export to the US market.
Whether this ‘threat’ comes to pass remains to be seen. If it does it will have a major impact on US sticker prices on the forecourt.
Polite and diplomatic
Trump was speaking in an interview with German newspaper Bild, which released excerpts of his comments translated into German.
BMW responded in a typically polite and diplomatic manner. Something Trump may have to learn.
"BMW is a global company and our new plant now under construction in San Luis Potosi, is part of our expanding global production network of 31 plants in 14 countries that supply our worldwide sales network in more than 140 countries."
"Construction is progressing in order to meet the scheduled 2019 production start and the BMW 3 Series Sedan will be built at the plant from 2019 onwards. Production is planned for the world market, not only North America, and the planned capacity will be a maximum of 150,000 units," the spokesman added.
Automotive plants in Mexico likewise are vital not only for the economy of the country but for each and every manufacturer, which is why the subject will be uppermost in the minds of those at the most senior level of companies affected.
And of course, it is not only vehicle builders who will be affected; component makers too are essential for the life and blood of the industry, and thus includes foundries.
For some of the most senior automotive executives, the Trump effect is not the only thorn in their side. The other is Brexit and already Nissan chief executive officer Carlos Ghosn has declared that Nissan will review the competitiveness of its car plant in Sunderland once the final outcome of Brexit negotiations becomes clear.
The car manufacturer announced in October that it was investing in production of new Qashqai and X-Trail models at Sunderland after receiving Government assurances that EU withdrawal would not affect the plant's competitiveness.
Speaking to reporters at the World Economic Forum in Davos, Switzerland, Ghosn said the company trusted Prime Minister Theresa May's assurance, but added that Nissan would want to "re-evaluate the situation" once the final deal is concluded.
Ghosn is not the only one with such thoughts in mind. Top level people in BMW, Honda and Toyota will be doing likewise, as will executives of two other international companies - Ford Motor Company and JaguarLand Rover. Even internationally owned Aston Martin will not be able to put the matter in its 'out tray' as a new way have to be found by way of doing business under Trump's seemingly isolationist regime.