MADE IN AMER­ICA CON­TEST

Af­ter jabs from Pres­i­dent-elect Trump, au­tomak­ers from around the world tout their man­u­fac­tur­ing ties in U.S.

USA TODAY US Edition - - MONEY - Nathan Bomey @NathanBomey Con­tribut­ing: Brent Snavely, Detroit Free Press

The glitzy an­nual auto show here typ­i­cally is a beauty con­test for new cars, but this year it has be­come a fo­rum for a brag­ging con­test among CEOs who want to de­clare their com­pa­nies are the most made-in-the-USA auto man­u­fac­turer.

Au­tomak­ers are prac­ti­cally trip­ping over them­selves to show off their Amer­i­can fac­to­ries fol­low­ing tweeted jabs by Pres­i­den­t­elect Don­ald Trump at com­pa­nies that as­sem­ble ve­hi­cles in Mex­ico to sell in the U.S. There’s a lot at stake. As Trump threat­ens a 35% tax on im­ported ve­hi­cles, which would re­quire ex­tract­ing the U.S. from the North Amer­i­can Free Trade Agree­ment, in­dus­try ex­ec­u­tives are fret­ting that their ma­jor in­vest­ments in Mex­ico sud­denly could be in jeop­ardy.

In some cases, au­tomak­ers proac­tively trum­peted their U.S. in­vest­ments at press con­fer­ences and in in­ter­views at the Detroit auto show. In all cases, they’re well pre­pared to share sta­tis­tics about their com­mit­ment to Amer­ica, in ad­di­tion to the claims:

Gen­eral Mo­tors. “We have the high­est do­mes­tic con­tent” of any au­tomaker and have made $11 bil­lion in U.S. in­vest­ments over the last two years, CEO Mary Barra told re­porters.

Ford Mo­tor. “We are the largest em­ployer of hourly automotive work­ers in the U.S.,” CEO Mark Fields said in an in­ter­view. Last week, Fields an­nounced the com­pany can­celed plans to build a $1.6 bil­lion plant in Mex­ico.

Fiat Chrysler. The third of Detroit’s Big 3 au­tomak­ers earned a lauda­tory tweet from Trump af­ter an­nounc­ing ex­pan­sion of a pair of plants and plans to hire 2,000 work­ers.

Toy­ota. Ja­pan’s largest au­tomaker has made “more than 25 mil­lion ve­hi­cles in the U.S. over the past 30 years, which hon­estly never ceases to amaze me,” CEO Akio Toy­oda said at a press con­fer­ence. Toy­ota said it would in­vest $10 bil­lion over the next five years in U.S. op­er­a­tions.

Volk­swa­gen. The Ger­man au­tomak­ing gi­ant noted its re­cent $1 bil­lion in­vest­ment in its Chat­tanooga, Tenn., plant to man­u­fac­ture the new VW At­las sport-util­ity ve­hi­cle.

“We are a very strong, in­vested, good cor­po­rate cit­i­zen in the United States,” VW North Amer­ica CEO Hin­rich Woe­bcken told re­porters.

Honda. Pres­i­dent Takahiro Hachigo opened the Ja­panese au­tomaker’s press con­fer­ence by not­ing that 2017 is the 40th an­niver­sary of Honda’s an­nounce­ment of its first Amer­i­can plant. The au­tomaker now has 12 fac­to­ries in the U.S.

“We made this de­ci­sion based on our com­mit­ment to make our prod­ucts close to our cus­tomers,” Hachigo said.

Jeffrey Con­rad, se­nior vice pres­i­dent and gen­eral man­ager, down­played the po­lit­i­cal dy­nam­ics of those in­vest­ment de­ci­sions but ac­knowl­edged that the im­pact of the Trump ad­min­is­tra­tion on the auto in­dus­try is the No. 1 is­sue dis­cussed at the show.

“The re­al­ity is, we have a pres­i­dent that hasn’t gone through an in­au­gu­ra­tion yet. Ev­ery­thing truly is spec­u­la­tion,” Con­rad said. “We are go­ing to look, wait and see, and we will re­act ac­cord­ingly.”

Many of the au­tomaker’s pro­nounce­ments cover in­vest­ment an­nounce­ments that al­ready were in the works.

They raise ques­tions about whether ex­ec­u­tives are play­ing a pub­lic­ity game in hopes of halt­ing mo­men­tum for im­port taxes, which could have a dev­as­tat­ing ef­fect.

“The reper­cus­sions would be tremen­dous,” said Tom Webb, chief econ­o­mist for Cox Automotive, which of­fers ser­vices to deal­ers and con­sumers. “You’re talk­ing about a tremen­dous falloff in terms of their ba­sic cor­po­rate struc­ture.”

Bar­ring any sig­nif­i­cant pol­icy changes, the Cen­ter for Automotive Re­search projects that U.S. share of North Amer­i­can automotive pro­duc­tion will fall to 58% by 2020, down from the pre­vi­ous low of 63% last year. That’s in part be­cause Mex­i­can automotive la­bor costs re­main 80% lower than Amer­i­can la­bor, although higher ex­penses for se­cu­rity and trans­porta­tion erode the sav­ings gap. Most au­tomak­ers have moved pro­duc­tion of small cars to Mex­ico be­cause they can’t make them prof­itably in the U.S.

A 35% tar­iff would elim­i­nate the sav­ings of man­u­fac­tur­ing in Mex­ico, Ford Chief Fi­nan­cial Of­fi­cer Bob Shanks said. “It’s not even close,” he said. What’s un­clear is how the auto in­dus­try would han­dle the ex­tra costs of a tar­iff.

The av­er­age Ken­tucky-as­sem­bled Toy­ota Camry would cost an ex­tra $1,000 to man­u­fac­ture be­cause about 25% of its com­po­nents are im­ported, Toy­ota North Amer­ica CEO Jim Lentz said in an in­ter­view.

“I un­der­stand what the pres­i­dent-elect is say­ing — he’s ba­si­cally say­ing that we want to have a vi­brant econ­omy, that we want to be more com­pet­i­tive in the world,” Lentz said. “There will be some win­ners and there will be some losers, and the automotive sec­tor would be a loser.”

Some be­lieve cars would get more ex­pen­sive as au­tomak­ers com­pen­sate. But Bar­clays an­a­lyst Brian John­son said in a re­search note that there’s “likely lit­tle abil­ity” for man­u­fac­tur­ers to pass costs along to con­sumers in the form of higher prices be­cause shop­pers “are fairly price sen­si­tive.”

Ford and GM are par­tic­u­larly well po­si­tioned to weather a trade storm in North Amer­ica be­cause of their sub­stan­tial U.S. op­er­a­tions. But Toy­ota, Nis­san and Hyundai each im­port about half of their U.S.-sold ve­hi­cles, while Mercedes-Benz and BMW “im­port the most into the U.S.” de­spite ex­ports from their Amer­i­can fac­to­ries to foreign mar­kets, John­son noted.

JIM WATSON, AFP/GETTY IMAGES

Toy­ota said it would in­vest $10 bil­lion over the next five years in U.S. op­er­a­tions.

SCOTT OL­SON, GETTY IMAGES

Ford CEO Mark Fields said the au­tomaker won’t build a $1.6 bil­lion plant in Mex­ico.

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