How Well Does Trump Understand What's Happening Within the Auto Industry?
President Donald Trump jumped on Twitter Sunday morning to rattle off a series of musings I couldn’t have cared less about. However, mixed in with the rest of them, was a reference to last month’s news that Ford abandoned its plans to import the Chinese-built Focus Active into the United States.
“‘Ford has abruptly killed a plan to sell a Chinese-made small vehicle in the U.S. because of the prospect of higher U.S. Tariffs,'” Trump said in reference to a CNBC article from August. “This is just the beginning. This car can now be BUILT IN THE U.S.A. and Ford will pay no tariffs!”
Whether or not you support the president, he has made a genuine effort to convince automakers to do their manufacturing within the United States. However, his comments on the matter make it seem as if he’s a tad confused on how things actually work. Perhaps we can attribute his statement to an unbridled optimism or a tongue-in-cheek jab at Ford. Otherwise, the only explanation is that he doesn’t have the best understanding of what’s happening with the industry — which would be mildly alarming.
In 2017, Ford’s plan was to move Focus production out of Michigan and into a new facility in Mexico to save itself some cash. That strategy was later scrapped after NAFTA’s future began to look less promising and the company decided to shift production to China.
As you probably already know, Ford has vowed to gradually eliminate every 4-door car from it’s U.S. lineup to focus primarily on utility vehicles. The Chinese-built Focus Active, which is fundamentally a crossover, was to be the company’s only exception. However, Trump’s last round of auto tariff threats appears to have frightened the automaker away from the idea.
That makes it difficult to see if the president’s comments were a roundabout way of saying Ford should have stayed in the U.S. or a total misunderstanding of the situation. Normally, that would be fine. It’s unfair to expect a politician to be an expert on every single industry, but Trump made the automotive sector one of his pet projects since his first week in office. He should really have his finger on the pulse here.
However, Ford’s official reasons for ditching to the Focus Active have everything to do with the economics of business. “It basically boils down to how we deploy our resources,” Kumar Galhotra, president of Ford North America, explained. He said the introduction of new tariffs would result in the Focus Active’s U.S. price being “substantially higher.”
Ultimately, the comment was not a catastrophic faux pas on Trump’s part. But it does force up an eyebrow uncomfortably high on the head. The president doesn’t have to know the ins and outs of every manufacturer to have an informed opinion. However, if he’s going to be taking such an active role in shaping the auto industry’s future, we’d like to at least feel as if he’s plugged into what’s happening.
[Image: Ford Motor Co.]
A staunch consumer advocate tracking industry trends and regulation. Before joining TTAC, Matt spent a decade working for marketing and research firms based in NYC. Clients included several of the world’s largest automakers, global tire brands, and aftermarket part suppliers. Dissatisfied with the corporate world and resentful of having to wear suits everyday, he pivoted to writing about cars. Since then, that man has become an ardent supporter of the right-to-repair movement, been interviewed on the auto industry by national radio broadcasts, driven more rental cars than anyone ever should, participated in amateur rallying events, and received the requisite minimum training as sanctioned by the SCCA. Handy with a wrench, Matt grew up surrounded by Detroit auto workers and managed to get a pizza delivery job before he was legally eligible. He later found himself driving box trucks through Manhattan, guaranteeing future sympathy for actual truckers. He continues to conduct research pertaining to the automotive sector as an independent contractor and has since moved back to his native Michigan, closer to where the cars are born. A contrarian, Matt claims to prefer understeer — stating that front and all-wheel drive vehicles cater best to his driving style.
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Trump the Businessman has known only 2 businesses: real estate & reality TV. In the former he has been bankrupt several times. In between his bankruptcies he drove many small businesses / contractors into bankruptcies by refusing to pay for work performed. In the latter, he has been successful. Trump's personal knowledge of international trade is limited to hiring cheap foreign workers for his ventures, and sourcing trinkets from China. Everything in the first paragraph is verifiable fact.
When Steve Jobs played loose with the facts and demanded the impossible they called it a Reality Distortion Field. They said he was a visionary - a force of nature - and they idolized him for it. When Donald Trump does the same thing they call him an idiot, and they shut their eyes to the massive economic expansion and unprecedented progress towards world peace happening right out there in plain view. They're too busy creating imaginary villains in every shadow. As Scott Adams argues, it's like everyone's staring at the same screen but seeing two different movies. Future historians and social psychologists are going to have a field day with this one.