Detroit grand bargain?

The matrix of jobs, factories, taxes and MPG

President Donald Trump made a visit to Michigan Wednesday in which he announced a grand bargain and sketched an even grander vision.

The bargain is that he, as president, will let up on fuel standards that automakers have said are unrealistic and have been imposed unfairly, and, in return, American automakers, and foreign automakers manufacturing in America, will build more cars.

The president was specific on two points: There must not only be new hires at present factories, but there must be new factories. And he still intends to find a way to add a surtax to foreign cars coming into the United States, and that includes Fords or Chryslers made in Mexico.

In a roundtable discussion with top representatives of the auto companies, the president was classic Donald Trump — by turns charming, jovial, complimentary and cajoling, aggressive and almost bullying. Turning to the CEO of Toyota North America, he said: “You have to build plants here. I know I gave you a hard time, but you have to build them here.” The sheepish Toyota man said: “I understand.”

The auto execs seemed both happy for the president’s intense interest, and wary. He said: “The assault on the American auto industry is over.” But none of the executives wanted to use language like that. Nor did they issue any guarantees.

The demands Mr. Trump makes in return for his help will be great. Some already seemed to be wondering if the help is worth it.

What did the president give up, from his side of the bargain? He revived an agreement that President Barack Obama made and then canceled in the last days of his administration to hold a “mid-cycle review” of federal fuel standards. Right now federal rules will require automakers to achieve a 54.5 mpg fleet average by 2025. The reason a review is needed, say the auto manufacturers, is that this goal will be almost impossible to meet. That is because consumers have not taken to hybrids and electric cars. Together, they represent about 3 percent of the market. Moreover, fuel-efficient small cars are languishing on car lots. Fuel is cheap, and Americans like big cars, trucks and SUVs.

Automakers also say that while they can make their fleets fuel-efficient by the current deadline, it will drive the cost of their cars up intolerably. Reversing the decision on the mid-cycle review gives the industry time. The standards would start to kick in by 2022.

Meanwhile, there are not just the jobs of autoworkers to save, but the Earth to save. And interestingly, that point was made, during the roundtable, by GM CEO Mary Barra and Dennis Williams, the head of the United Auto Workers. Both said it is too late to turn back the clock on electric cars, that auto manufacturers need to be good environmental citizens and that fuel-efficient cars can save consumers a lot of money. They pushed the president not to forget about greenhouse gases.

Sure, said Mr. Trump. But the president said he’d trade a little fuel efficiency for more American jobs any day. The question is: How many new auto manufacturing jobs will there be in the United States by 2022 or 2025?

Some of the executives later pointed out that the market, not the grand bargain, will really determine the answer. Yes, and one other factor: Mr. Trump’s tax on foreign imports.

The president spoke of “an American economic model”: That model is, simply put, to protect United States industry and workers and to increase U.S. industry and workers. The president said in Michigan that “buy American and hire American” is not just a model, “it’s a pledge to the people of the United States.” That such a model, and such a pledge, will be difficult to fulfill is no reason not to try.