The U.S. auto industry has seen one major headache go away. However, that doesn’t mean industry jitters have ceased.
The Trump administration announced Sept. 30 that Canada will be part of a new trade agreement with the U.S. and Mexico. That will, essentially, preserve an automotive supply chain extending across the three countries that formed because of the North American Free Trade Agreement.
“Aside from avoiding disaster, there really wasn’t much to gain or lose” in the new agreement, said Kristin Dziczek, a vice president of the Center for Automotive Research (CAR; Ann Arbor, MI) in an e-mail interview. “There will be some movement of supply chains to North American on the margins.”
NAFTA will get new “branding.” It’s now going to be called the U.S.-Mexico-Canada Agreement, or USMCA.
“USMCA. That’ll be the name, I guess, that, 99 percent of the time, we’ll be hearing: USMCA,” President Donald Trump said Oct. 1, according to a White House transcript. “It has a good ring to it.”
Of course, Trump isn’t neutral. He criticized NAFTA when he ran for office.
“I have long contended that NAFTA was perhaps the worst trade deal ever made,” he said in discussing the new deal. “To me, it’s the most important word in trade because we’ve been treated so unfairly by so many nations all over the world. And we’re changing that.”
One Fight Down…
CAR’s Dziczek, whose portfolio covers economics, trade and labor, said the changes under USMCA won’t all be favorable.
“Production costs will go up, and sales will likely go down---all other things equal,” Dziczek said.
Trade publication Automotive News, in a recent editorial, sounded more relieved than celebratory.
“This rebadged North American Free Trade Agreement is good for the industry not because its terms are favorable, but because the fight is over,” according to the editorial.
This fight may be over. There are other trade conflicts. Trump has led the U.S. into a trade war with China. There are also trade tensions with the European Union and other regions.
“Yes, there are still jitters about China, the possibility of Section 232 tariffs being imposed on Japan, EU, U.K. once it leaves the EU, and South Korea,” Dziczek said.
Section 232 is the term the U.S. Commerce Department uses for investigating whether tariffs should be levied.
Trade isn’t the only worry.
Ford Motor Co. (Dearborn, MI), a decade after avoiding bankruptcy, is again looking to revamp itself and cutting jobs.
The automaker relies heavily on large pickups for the bulk of its profit. Its CEO, Jim Hackett, who took command of the company last year, talks about making Ford more fit.
In early October, the company told salaried employees that cuts are coming. For now, there’s no hard timeline.
“We are in the early stages of reorganizing our global salaried workforce to support the company’s strategic objectives, create a more dynamic and empowering work environment, and become more fit as a business,” the company said in a statement. “The reorganization will result in headcount reduction over time, and this will vary based on team and location. We will announce more specifics at the appropriate time.”
During the 2000s, Ford had a series of restructuring plans that cut thousands of jobs. The company recruited Boeing Co. executive Alan Mulally as CEO in 2006. He sold off European luxury brands and got rid of Mercury. The company was able to avoid bankruptcy, unlike General Motors and Chrysler, because it borrowed using its assets (including trademarks such as the Ford blue oval logo) as collateral.
Mulally at the time was hailed as a turnaround artist. But that was then. The automotive world has gotten more complicated since Mulally retired in 2014. Now, there are issues such as self-driving cars and ride-sharing services to deal with.
Mulally’s successor, Mark Fields, was found wanting by the company’s board. Now it’s Hackett’s turn. The outcome isn’t assured. Once more, Ford employees brace themselves for cuts.