Fiat CEO Warns May Shut All Mexico Production If Trump Tariff Too High

Tyler Durden's picture

Agree with his proposed policies or not, it's difficult to argue that Trump is delivering on his promises to the autoworkers of the Midwest who single-handedly voted him into the White House.  Before even taking office, the mere threat of import tariffs has caused Ford to cancel the construction of a $1.6 billion new facility in Mexico, and has automotive CEO's from Toyota to Chrysler walking on eggshells as they carefully try to flaunt all of the capital investments they're making in U.S.-based facilities.

While likely secretly hoping for the status quo, Fiat Chrysler's U.S. CEO, Sergio Marchionne, admitted earlier today that if Trump's import tariffs are "sufficiently large" he would be forced to shutter all of his manufacturing capacity in Mexico as it would be rendered "uneconomical."  Per the FT:

Fiat Chrysler may close its Mexican car plants if Donald Trump imposes sufficiently stringent tariffs on vehicles coming into the US, chief executive Sergio Marchionne said on Monday.

 

“It’s possible that if economic tariffs are imposed…and are sufficiently large, it will make production of anything in mexico uneconomical and we would have to withdraw,” he said in Detroit on Monday. “It’s quite possible.”

Sergio

 

As it turns out, purchasing 18mm cars per year, even if those purchases are fueled by a massive subprime auto lending bubble, affords the U.S. some leverage on where those vehicles are manufactured.  And, as Marchionne points out, the manufacturing capacity in Mexico was specifically designed and tooled to manufacture vehicles for the U.S. market which means that attempts to "re-purpose" the facilities for the export market would almost certainly be uneconomical. 

Chrysler produces 503,000 vehicles in Mexico a year at two sites and is heavily dependent on exports to the US, with 86 per cent of its cars sold to US or Canada in 2015.

 

Mexico’s car industry has blossomed under the North American Free Trade Agreement, with the industry making 3.4m cars a year and automakers from Ford and GM to Nissan and Volkswagen producing vehicles in the country.

 

But the industry is heavily reliant on access to the US and Canadian markets, accounting for 82 per cent of the country’s 2.7m exports.

 

“The reality is the Mexican auto industry has been tooled up to try and deal with the US market,” said Mr Marchionne at the Detroit Motor Show. “If the US market were not to be there, then the reasons for its existence are on the line.”

 

Some car makers, such as Nissan and Volkswagen, use Mexico as a base to export to Europe or Latin America. But Mr Marchionne said it would be too expensive to repurpose the company’s existing Mexican site to export all over the world.

 

“That transition would be costly and it would be very very uncertain, there is no easy transition, those plants were designed built and purposed at a time when nafta was alive and well,” he said.

According to the Ann Arbor-based Center for Automotive Research, Mexico accounts for one-fifth of all vehicle production in North America and has attracted more than $24 billion in investment since 2010.  As we noted a few months ago, as of right now, this is where all of that money was spent. 

 Mexico Production Facilities

 

And with America's United Auto Workers making just over 7x what comparable workers make to build the same products in Mexico, we suspect car shoppers in the U.S. should get accustomed to pay a little more for their Ford Focus or Chevy Cruze.

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Antifaschistische's picture

oh crap!!!  What would we do without FIATS!!!

evoila's picture

looks like mexico is going to have to pay for a wall if they don't want tariffs.

peddling-fiction's picture

Looks like the tribe is preparing to buy Mexican business and real estate on the cheap.

ACP's picture

Now it's time for some stiff tarriffs on Hollywood for moving production to Canada and other countries.

I think 1000% should suffice.

knukles's picture

In 8 weeks Trump has tweeted more new good jobs than Obama and the Establishment created with all their grand plans and programs in the last 8 years.

BTW.  The moment that the wall's height is decided, say 16 feet, Goldman will have already purchased all 17 foot ladder manufacturers on earth.

Just sayin'

Kprime's picture

I am crowd sourcing the funds to manufacture 2 foot ladder add-ons.  I will undercut Goldman.

The Saint's picture

Can you buy Stock on Donald Trump?

 

jcaz's picture

Hey, looks like Fredo finally gets it- cancel the early-morning fishing trip on Lake Tahoe........

BabaLooey's picture

Vicente Fox's...........HEAD EXPLODING IN 3.............2.................1............

PINATA~

OLE~ 

False_Profit's picture

And the jobs godemperortrump is queuing up are full time career jobs, as opposed to Obama the communist part time bartending jobs...

Parth's picture

FYI most of the jobs Obama created were service jobs close to $10/hr or so. Funny thing is Trump is allegedly bringing back auto jobs, but they pay the same. Issue is high paying manufacturing jobs make no sense anymore and America needs new skills, not tariffs and affirmative action. Bernie Sanders was the best hope for this zero tuition which essentiall is available from Germany to India. That will be obvious in 2 years when all the jobs that come will be basically bottom of the barrel pay types to appease the news headlines. I just cameback from holiday in India, now there the employment pages are golden. Truly golden. People are simply having a ball. Mercedes everywhere.

NoDebt's picture

Fiat is the only company you can't make a worse analogy from their name.

You could make an analogy like "it's the Fiat of guns" or "It's the Fiat of hot water heaters" or whatever, but when you get to actually describing Fiat, that leaves you with nowhere left to go to describe it.

 

Peak Finance's picture

No No you missed the best one:

FIAT

Fix It Again Tony

of course it does not help that their best cars and engine combos are not available in the US becuase bullshit regs

FIAT TORO

 

44_shooter's picture

Hey now - I own a new Fiat. They are super great CHEAP cars for transportation to and from work.

Where else can you lease a car for $99/month for 3 years ($3564) THEN get a rebate from the State of Fuck-U-Fornia for $2500, reducing your TOTAL 3 YEAR PAYMENT to $1064.

I LOVE FIAT.

TheMeatTrapper's picture

Sorry pal. You need to turn in your man card - and that 44 on your way out.

RedBaron616's picture

It is new, that's why you like it. Just wait. Sell at 75,000 miles or less!

skeelos's picture

US dollar - it's the Fiat of money.

SilverRhino's picture

It's the Obama of cars ... full of shit, hot air and never delivers as promised.

wren's picture

Good!

I am beginning to wonder if Mexico had their own lobby to raise our wages and baby our unions to the point where Mexico would get the manufacturing line...? It would have been a good move if they did!

If we are buying them, we should have the jobs to manufacture them. If you don't want US dollars by manufacturing and selling your cars to us, you need to find another market.

Kayman's picture

NAFTA has been a disaster for car manufacturing in the U.S. and Canada. The only difference being Canada continues to be too PC to say that they've been too stupid by letting Mexico steal their jobs too.

And just an aside, to show how bright the Canadians are, they have put a tarill varying from 120% to 240% on American-made gypsum wallboard- just a few months before their lumber industry becomes the target of anti-dumping and countervailing tariffs. Opening move- slap the other side in the face and call his mother a drunken whore.

pipes's picture

Mexico's paying for the wall, whether they - or anyone else - will acknowledge it.

 

In one way, shape, or form...the cost will be extracted from Mexico.

Takeaction2's picture

EVERY SINGLE DAY......we have 

WIN...

after

WIN...

after

WIN...

............and TRUMP isn't even President yet....

Oh it is a great time to be alive.....unless you are a crybaby liberal leftist Democrat.

44_shooter's picture

I can't wait for the day to come when I'm tired of winning, and I'm going to say Mr President, I'm tired of winning, and then we're going to win some more.

svs9000's picture

The wall is coming...

Vin's picture

They're starting to get the point.

Omen IV's picture

"those plants were designed built and purposed at a time when nafta was alive and well,” he said."

 

So Bill Clinton lost the 10 million jobs on his signature of the NAFTA & WTO  - not due to technology or robots?

so the mother board in a laptop or Computer controlled lathe or Quality Control System or Robot could be anywhere on the "planet" - the difference was ALWAYS the TARIFF - no more no less

The big lie always there - in plain view but never said -  was the NEO LIBERAL DEMOCRATS WERE PAID  to eliminate the tariffs and destroy the WHITE MIDDLE CLASS JOBS

Democrats hate white people - Murder by Neglect was the operative policy to be continued by Hillary

 

the lie is now in the public space as is the Emperor with No Clothes - Barack Peddling Fiction Obama leaves the stage!

Kayman's picture

The simple truth.  America, and American jobs were sold out by corrupt American politicians. Foreign countries had one goal, tariff-free access to the American consumer.  And the Clintons and wannbee Clintons raked in the dough bigtime- the country be damned.

jimsoong25's picture

Both Bushs and both Clintons are globalist NEOCONs.  Bush 1 negotiated NAFTA and Bill signed it.  Bill negotiated China's entry into WTO and Bush 2 signed it.  You can go on Youtube and see Bill's trade reps talking about how many new manufacturing jobs will be created.  Party doesn't matter to NEOCONs. 

https://en.wikipedia.org/wiki/Haim_Saban

"Saban says his greatest concern is to protect Israel. At a conference in Israel, Saban described his formula. His three ways to influence American politics were: make donations to political parties, establish think tanks, and control media outlets.[28]

Saban became involved in politics in the mid-1990s when he felt that support for Israel was slipping in the United States.[5] He says his views have shifted over the years:[2] "I used to be a real leftist..."

As owner of Univision, he used it to attack Trump.  Remember the press conference where his reporter had to be removed?

NEOCON filth.

 

aeslong's picture

it long overdue derseves to be shutdown. You can't deprive american workers from jobs, and then sell products to the deprived american workers.

CJgipper's picture

You can if you're also selling them debt.

buzzardsluck's picture

Just accept the new 15 year car loan and move along (I used to think I was terrible at math)...

 

Fuck meheyco

samsara's picture

again,

I think all these companies are seeing Mexico move into a complete failed state in a couple of years.

I think they are moving inside the 'Wall' for protection.

look at the protests in Mexico about Gas prices.   

 

Failed State Mexico,  

LyLo's picture

And for all the fuckery with numbers, it's a 50 cent move per gallon that happened.  Oh, and their gas actually costs about the same as ours, apparently.  For heavens sake, if the US were to riot every time gas went up by 50 cents, we'd have been basically frozen as a country for a good portion of my life (until it rubber-banded back down a few months later--seriously, it was like 20 years of this.)

If you ask me, Mexico is already a failed state.

Kprime's picture

Mexico will follow Venezuela.

StreetObserver's picture

THIS is what we elected Our Man President Trump to do! (Well, other things too.)

Support President Trump by weaponizing your wallet. Simply spend nothing you absolutely don't have to, and in cash, for the rest of the month. Carry it forward to February and President Trump's economy.

Cars will be cheaper in February as there are large numbers of lease returns about to hit the market, as well as all the repos from interest rates resetting.

 

az_patriot's picture

Time to stick it to 'em.  The car manufacturers haven't been shipping jobs to Mexico because they needed to in order to compete.  They've been shipping jobs out of the country so they can pay slave wages.  I'm a capitalist at heart, and do believe in maximum profitability, but there are limits.  Now, when is Apple going to stop producing iPhones in the slave camps in China?

shovelhead's picture

When the FEMA Camps can supply a dependable workforce.

Kprime's picture

god I wish more folks had enough brains to understand this.  Car manufacturers want to rake in tens of thousands per car when they sell them in the US.  However, in cahoots with .gov, they want to manufacture them for 3.25 an hour.  They pay no employment taxes, no US taxes, and provide no retirements for the workers making them into billionaires.  That is not "free market".

additionally this will all come to an end naturally when the manna from the earth (oil) is no longer easy and cheap to acquire and use. most of the "manufacture and ship program" will grind to a halt and local production will again be king.

Old Pecksniff's picture

Bring it on...35% tariff!  CNBC & Vicente Fox can keep squealing about whether Donald Trump is a legitimate president.

Kayman's picture

A corporate whore, CNBC, and Buffets bum-boy Vicente Fox, spouting off about legitimacy? 

shovelhead's picture

Doesn't Chrysler have a Low-Rider Division they could keep open to service Latin America?

What about those guys who make the little chrome chain steering wheels? Will they starve too?

bh2's picture

Paraphrasing LBJ, Trump may be saying in private "I'll have those autoworkers voting Republican for the next 200 years!"

Bemused Observer's picture

Why does everything have to be 'global'? Maybe one of the problems with these huge companies is that it costs too much to BE global, and ends up forcing them to cut costs too aggressively. Maintaining global supply-chains and multiple different manufacturing points all over the planet has got to be ridiculously expensive. Maybe we should scale this shit back, and start thinking regionally, locally, instead of globally.

When you think about it, why should cars destined for Europe be made in Mexico? Europe has car-making capability, and they DO make cars over there. Why do they need Mexican-made cars? And we make cars here, so why are we importing them? Don't tell me its 'free market'...in a free market, both producer AND consumer would have equal access to those global markets, but they don't, do they? (Try to save money by buying your medication from a pharmacy in India and see how 'free' that market is for consumers...)

It's not a free market if you have producers free to produce anywhere, but consumers are restricted by laws and regulations to domestic markets. Either it goes both ways, or it needs to be shut down and we all go back to making our own shit in our own countries, and charging hefty tariffs for outsiders who want access to our markets for their products.

If they can make it in Mexico and sell it here, I should be able to live here, and buy it from Mexico, or India, or Taiwan, or where ever I can find it cheaper, just as easily. Corporations should not be 'free' to take advantage of captive consumers.

Kayman's picture

"Global" and "Free Trade" are just marketing buzzwords to hog-tie you and steal your wallet.

Since employment standards, regulations and wages are never equal between countries there can never be anything like "Free Trade".

The competition is between countries.  Who can supply the cheapest slave labor and no pollution controls. I don't think I need to tell you which countries win that contest. I'll give you a clue, though, it ain't America.

chicmagnet's picture

Ive been saying for years that the best thing that could happen to create local and regional economies is $200 plus oil.

brushhog's picture

Of course. Thats the point of a tariff.

Five Star's picture

Its not just Mexico. Since 2009 China has increased its automotive production by an amount larger than the entire 2015 production of the US, Japan, and Mexico combined and those cars are now starting to be imported to the US too.

http://thesoundingline.com/dissecting-global-motor-vehicle-production/