Published on November 21st, 2016 | by Steve Hanley
Ford Continues Its Dysfunctional Tango With Donald Trump
During the interminable election campaign, Donald Trump tangled repeatedly with Ford CEO Mark Fields, criticizing him severely for moving production of the Ford Focus to the company’s assembly plant in Mexico, where average wages are 80% lower than in the US. Fields fired back that no American jobs would be lost and in fact the move would open up room in Ford’s US production facilities to build other vehicles that have higher profit margins. Presumably Fields means Ford F-150 pickup trucks and other similar vehicles.
Fields also pointed out that Ford has added 25,000 jobs in the US since 2011 and that it builds more cars in American than any other company. None of that had much affect on the blowhard-in-chief, who insisted that he will slap a 45% import duty on all cars produced in Mexico, dismantle NAFTA (which includes Canada, a fact that the Trumpster seems oblivious to), and build a hugely expensive wall along the border with Mexico.
Trump’s paranoia about Mexico and its citizens borders on mental instability. He started his campaign by describing Mexicans as murderers and rapists. He apparently has no understanding whatsoever of the effect globalization has had on manufacturing. The truth is that there are virtually no trucks or automobiles built exclusively in America using American workers and US made parts. The one company that comes closest is Tesla.
The supply chain for the tens of thousands of parts that go into a typical vehicle includes products from virtually every industrialized nation. Even cars that most believe are “American Made” are merely assembled here using parts sourced from almost every semi-industrialized country in the world. General Motors also builds many of its vehicles in Mexico. Why Trump has chosen to target Ford and not GM remains a mystery.
Last week, Trump waded in to the fray even deeper by falsely bragging on Twitter that he singlehandedly prevented Ford from closing an entire assembly plant in Louisville, Kentucky and moving production from thereto Mexico. That was a lie. Unbeknownst to Trump, Ford has contracts with the United Auto Workers. Those contracts require the company’ to negotiate with the United Auto Workers before closing any plants or laying off workers.
What Ford did propose to do was move production of the slow selling Lincoln MKC to another plant — either in Michigan or Mexico — so it could increase production of the hot selling Ford Escape. Not a single American job would be lost, a fact that Trump was apparently unable to comprehend. Ford says it is in constant contact with the Trump transition team. When it mentioned about moving MKC production, the Trump camp went ballistic and created the plant closing story to fit its own delustional view of the world.
The dysfunctional tango between Trump and the car companies will continue as long at The Trumpter is in office. All of them are dancing a little jig right now as they contemplate lower corporate tax rates, a reduction in or elimination of CAFE rules, and a big increase in infrastructure spending by the federal government. They prefer not to think about the coming hard times predicted by Morgan Stanley as the transition to electric vehicles continues. The investment banking house issued a report last week that forecasts much lower industry profits in the years ahead.
The US auto industry has been complaining that it cannot produce small cars at a profit since the Kennedy administration. There actually is a way that car companies could build small, efficient automobiles profitably in the United States but it would mean cutting workers’ wages by 80%. If that happened, the only people applying for work in those factories would be Mexicans and other immigrants. Oh, wait. Trump’s head just exploded!
Trump uses bluster and bullying as a substitute for leadership. Any improvement in the US economy over the next four years is more likely to occur because of good management decisions than his bombastic meddling.