Trump Triumph or Twitter Smoke & Mirrors?

trumpvsford
President Elect Donald Trump, who refuses to face the press for questions, announced via Twitter how pleased he was that Ford Motors was canceling their planned $1.6 billion dollar expansion of their manufacturing operations in Mexico and adding 700 jobs in Michigan instead.

“Trump has previously slammed the company for plans to move all small-car production to Mexico, and claimed that he helped stop Ford from shifting an entire factory from Kentucky to Mexico. Ford has repeatedly said it has no plans to close any U.S. plants.” – source CNBC HMMM.

 

In that same CNBC interview, The CEO of Ford, Mark Fields, was very quick to fire back that the change in plans was NOT at all to capitulate to Trumps threat of a 35% import tariff on Ford vehicles produced in Mexico for sale in the United States, but instead that the investment of $700 billion in expanding their Michigan manufacturing facilities was how they regularly do business, always first trying to keep business at home when it makes business sense, and that it was due to decrease in market demand for small gasoline powered cars and their planned move into the “electric car era.”

 

The Washington Post’s Danielle Paquette laid out in detail the actual reasons Ford canceled the Mexico small car plant:
  1. Fields was blunt about why Ford changed its mind and canceled a $1.6 billion factory slated for San Luis Potosi. “The reason that we are not building the new plant,” he said, “the primary reason, is just demand has gone down for small cars.”
  2. Ford wants to be the leader in Electric vehicles, so they are investing $4.5 billion in electric vehicle production by 2020
  • They need the electric cars to be assembled near the engineers
  • Ford currently employees 85,000 workers in the United States, but auto manufacturing at Ford from this point forward WILL become increasingly automated, resulting in FEWER jobs for line workers
  • “Each iteration of a facility becomes less like old school manufacturing and more high-tech,” Smith said. “THAT WILL ULTIMATELY MEAN FEWER JOBS.”  Automation allows companies to produce more using fewer people.
“The Ford engineers, tasked with creating the Electric models, work in Dearborn, MI, 20 miles from the Flat Rock assembly plant. Moving production to Mexico would have made their jobs harder, said Brett Smith, an auto analyst at the Center for Automotive Research in Ann Arbor.”
For anyone still paying attention at this point, Ford isn’t abandoning production in Mexico.
  • They currently employ 8,800 employees in their Hermasillo, Mexico plant
  • They shipped 265,000 cars to the United States from that plant between January and August 2016
  • They intend to continue making gasoline-powered Ford Focus vehicles there.

The Nitty Gritty:

  • Mexico is the United States’ third largest trade partner
  • Imposing a 35% tariff on imports from Mexico would mean tearing up NAFTA, which he doesn’t need Congressional approval to do, but Mexico will fight any change to NAFTA via imposition of comparable tariffs on American imports
  • Trump would have to get Congressional approval to impose any new international tariffs
  • International tariffs, in the past, have cost Americans money and hurt our economy

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