Donald Trump could have picked a better car to bash.
The incoming president lashed General Motors (GM) on Twitter recently for making its Chevrolet Cruze subcompact in Mexico. Whoops. The Cruze sedan—which accounts for 97.6% of all US Cruze sales—is actually built in Lordstown, Ohio. The slow-selling Cruze hatchback is built in Mexico, but annual sales of just 4,400 units are virtually negligible.
General Motors is sending Mexican made model of Chevy Cruze to U.S. car dealers-tax free across border. Make in U.S.A.or pay big border tax!
— Donald J. Trump (@realDonaldTrump) January 3, 2017
Trump went after GM just as cross-town rival Ford announced it was canceling plans to build a $1.6 billion factory in Mexico, as Trump has been urging the company to do since campaigning last year. Ford will still move production of its Focus subcompact from Michigan to Mexico, by ramping up production at another plant instead of building a new one. But it will also invest a fresh $700 million in Michigan, helping create 700 new jobs. Trump tweeted his approval.
The Ford news overshadowed Trump’s blunder regarding the Chevy Cruze, but Trump’s confusion on that is understandable. Automobiles are complex products that typically include components from all over the world. And most automakers sell their cars in dozens of countries, which means they have to base production decisions on a multitude of factors including consumer tastes, labor and material costs, exchange rates, transportation efficiency and where a given model is likely to sell the most. Hatchbacks aren’t popular in the United States, for example, but European drivers love them, which is part of the reason GM builds the Cruze hatch in Mexico—it can export from there to Europe with no tariffs, while the same car shipped from the United States would face a 10% levy.
Trump’s crusade to protect American manufacturing jobs has nonetheless put GM and Ford (F) in the crosshairs, and other automakers might be next. Trump targeted Ford during last year’s campaign because of news the company was opening a new factory in Mexico, to build the Focus subcompact. On another matter, Trump took credit for persuading Ford’s Lincoln division to keep producing its MKC crossover at a plant in Kentucky instead of moving it to Mexico, although Ford had merely been planning to adjust production, not move work permanently out of the country.
The most ‘American’ cars
Trump has now extended his campaign against the automakers to GM, though he could just as easily have targeted Fiat Chrysler, Honda, Toyota or Volkswagen. Virtually every global automaker assembles cars in Mexico, as this map from the Center for Automotive Research shows:
While GM has three factories in Mexico, Trump may not be aware that it also builds some of the most “American” cars on US roads. In an annual “made in America” index calculated by American University’s Kogod School of Business, 9 of the 10 vehicles with the most American content are GM models, including the Buick Enclave, Chevy Corvette and Chevy Equinox. The Ford F-150 pickup is the only non-GM vehicle in the top 10. The Kogod rankings are meant to capture the value that accrues to the US economy from all aspects of automotive production, including not just manufacturing but also things like research and development and where the automaker’s profits are likely to be spent.
A few other American models would have been better targets for Trump than the Cruze, which is tied for 24th place in the Kogod rankings. The Ford Fusion ranks 39th on the Kogod scale; the Dodge Journey 43rd, the Jeep Renegade 49th, the Cadillac SRX is 53rd, and the Chevy Trax 59th. It’s tricky, though. The Fusion, for instance, is assembled in Mexico with a transmission built in the United States. The Journey is also assembled in Mexico, with major components from America, Mexico and Italy, depending on which variant you get.
Foreign automakers assemble some cars in the United States, but they’ve been flocking to Mexico as well. The majority of Volkswagens sold here are imported from Mexico, along with the Honda Fit, the Nissan Sentra and some Mazda 3s. Toyota is building a Mexican factory that will produce the Corolla. In general, automakers build the smallest vehicles with the lowest profit margins in low-cost countries such as Mexico, because labor costs are a larger portion of overall expenses on such models. An interesting question is whether Trump will go after foreign automakers that ship cars to America from low-cost countries, or limit his attacks to domestic automakers.
GM and Ford are easy targets in a few ways, since they’ve both reduced their American manufacturing workforce over time as they’ve spread out globally and embraced automation. GM became unpopular when it declared bankruptcy in 2009 and required a federal bailout to survive. Chrysler did the same thing and ended up married to Italian automaker Fiat as part of its own bailout. Since Trump hasn’t yet targeted Chrysler, it could be next.
But the three automakers are still among the biggest employers in the United States. GM and Ford each employ more than 50,000 unionized blue-collar workers here, and the tally at Fiat Chrysler is nearly 40,000. Those are generally the type of decent-paying jobs, not requiring a college degree, Trump says he wants more of. GM CEO Mary Barra is one of the business leaders Trump has enlisted for an elite advisory council, so she can press the automaker’s case with him directly. Or, she could just tweet him.
Rick Newman is the author of four books, including Rebounders: How Winners Pivot from Setback to Success. Follow him on Twitter: @rickjnewman.
