Connect with us

Trump’s Mexico tariffs would hurt GM the most among automakers

Trump's Mexico tariffs would hurt GM the most among automakers


Trump’s Mexico tariffs would hurt GM the most among automakers


DETROIT – General Motors stands to lose the more than Ford Motor Co. or Fiat Chrysler Automobiles if President Donald Trump carries out his threats to impose escalating tariffs on Mexican imports. 

Trump, in an effort to get Mexico to crack down on migrants fleeing violence in Central America who seek U.S. asylum, said a 5% tariff will begin on June 10 and potentially increase to 10% on July 1, and monthly thereafter until the duty reaches 25%.

GM faces particular exposure if these tariffs go into effect because it imports 29% of its components from Mexico. Ford imports 17% and FCA at 24%, a research note from Deutsche Bank said.

Also, GM builds its new Chevrolet Blazer SUV, its Chevrolet Silverado and GMC Sierra Crew Cab pickups, the Chevrolet Equinox, Chevrolet Trax, and GMC Terrain SUVs all in Mexico.

Trump’s threat is especially bad timing for GM because the new Blazer SUV appears to be in demand and inventories are tight, said Michelle Krebs, executive analyst with Cox Automotive’s Autotrader.

More: Trump’s Mexico tariffs could cost Detroit automakers billions

More than cars: Tariffs pause China’s purchases of American soybeans, report says

“There will be an impact on GM because they’re quite vulnerable,” Krebs said, noting that it’s not just the Blazer that’s at issue. “They’re building the Silverado there. That’s their cash cow. That’s probably more concerning.”

Krebs said it’s hard to know what GM and other automakers will do — absorb the increased costs as they largely did with steel and aluminum tariffs over the past year, or raise prices, which could be across the lineup to avoid hurting sales of any one vehicle.

Earlier this month, the United States said it will lift tariffs on steel and aluminum from Canada and Mexico, ending a yearlong standoff that cost Detroit automakers billions and threatened smaller suppliers.

All of the uncertainty around trade and tariffs is troubling for automakers, experts said. For GM, its pickup production in Mexico makes it particularly vulnerable.

Last year, GM sold 585,581 Silverado pickups in the United States, 236,146 were imported from Mexico, Deutsche Bank data show. GM sold 219,554 Sierra pickups last year and 78,209 of those were built in Mexico.

“The Blazer is the least of our worries. It’s a political hot button, but the Blazer is only 50,000 units a year,” said Kristin Dziczek, vice president of industry, labor and economics for the Center for Automotive Research in Ann Arbor. “We’re looking at 600,000 units in pickups built in Mexico, so there’s no comparison in terms of the impact of this tariff on GM.”

The most troubling aspect of Trump’s tariff threat, said Dziczek, is exactly that: Is it just a threat or is it real? Either way, it’s damaging to the auto industry.

More: Who gets hurt by China’s new tariffs on American goods? Farmers and chemical makers

“Will the new NAFTA agreement pass with this hanging over it? The Congress has to consider that (threat),” said Dziczek. “It makes it very difficult to ratify the new NAFTA, so that’s even more uncertainty over the cost to the auto industry. What the auto industry craves is certainty. Right now we see a lot of investment sitting on the sidelines.”

Meanwhile, GM has faced political heat for saying it would idle five factories in North America this year. Two of those are in Michigan: Detroit-Hamtramck and Warren Transmission. The UAW will likely push GM to assign new vehicles to Detroit-Hamtramck and Lordstown, Ohio, when contract negotiations start this summer, Dziczek said. But, she warned, a tariff on Mexican imports might not inspire GM to add Blazer production in the United States.

“Would GM agree? Who knows given the long-term implications are uncertain and tied up in politics,” said Dziczek. “A move to the U.S. is a move to a higher-cost region, and that has implications for productivity, for jobs, for wages, for everything. With market growth slowing, the companies are not looking to duplicate capacity, so asking them to duplicate facilities puts them in financial strain.”


Source link

Continue Reading
You may also like...
Click to comment

Leave a Reply

Your email address will not be published.


To Top
error: Content is protected !!