Suddenly the coolest thing in corporate America is announcing major capital investments in the US while adding thousands of American jobs, in other words the opposite of the globalization trend of the past 30 years, in yet other words, doing precisely what Donald Trump demands. The latest to jump on the bandwagon is none other than Fiat Chrysler, the Italian carmaking giant which ironically acquired US automotive icon Chrysler's assets after just a 42 day stay in bankruptcy during the financial crisis.
Just days after Ford scrapped plans to build a $1.6 billion plant in Mexico and invest $700 million in a factory in Michigan, following threats from Trump aimed at General Motors to focus on the US instead of Mexico which would be repeated just days later targeting Toyota, Fiat Chrysler (FCA, or Fiat) on Sunday said it will invest $1 billion to modernize two plants in the U.S. Midwest and create 2,000 jobs, in an attempt to placate the president elect as well as upping the ante as automakers respond to threats from President-elect Donald Trump to slap new taxes on imported vehicles.
Fiat announced that a plant in Warren, Michigan, near Detroit, would make the Jeep Wagoneer and Jeep Grand Wagoneer SUVs, while a Toledo, Ohio, factory would produce the Jeep pickup. The company said the production plans in Ohio and Michigan were "subject to the negotiation and final approval of incentives by state and local entities."
That said, Fiat's ulterior motives did not end with merely avoiding Trump's wrath.
As Reuters adds, FCA's announcement that it would retool factories in Ohio and Michigan to build new Jeep sport utility vehicles, including a pickup truck, and potentially move production of a Ram heavy-duty pickup truck to Michigan from Mexico, also highlighted the auto industry's keen interest in getting relief from tough fuel economy rules enacted by the outgoing Obama administration. Many automakers plan to use the annual North American International Auto show in Detroit, which started on Saturday, to tout investments in the United States and a commitment to U.S. employment against the backdrop of Trump's criticism of automakers for shipping vehicles into the U.S. from Mexico.
Automakers are girding for rounds of questions about Mexican investments and U.S. jobs in the wake of Trump's harsh criticism of automakers.
Most of the major automakers in the U.S. have substantial vehicle making operations in Mexico, as well as complex networks of parts makers that supply their factories in the U.S. and support jobs and investment in states such as Ohio and Michigan.
Reuters adds that Fiat's investment decision was not related to Trump's recent attacks Ford,General Motors and Toyota for building cars for the U.S. market in Mexico, as the company had already signaled plans to expand truck and SUV production at its U.S. plants, and discontinued production of small and medium-sized cars in two U.S. factories.
And while it is likely that Fiat execs did not discuss the company's plans with the president elect ahead of time, according the Reuters source Fiat CEO Marchionne wanted to get out the news about adding jobs and investment in the United States in case FCA encounters more criticism from Trump.
And that's how Trump's Twitter "bully pulpit", politically incorrect as it may be, gets the job done: in Reuters' words, "since Trump's election, automakers and other companies have played up their investments in the United States." It's almost amazing how a few well-timed threats can get companies to reevaluate their capex hurdle rates...
It's not just the Italian who are eager to placate the president elect.
According to Reuters, Hinrich Woebcken, CEO of the North America Region for the scandal-ridden German automaker Volkswagen AG, the automaker plans to invest $7 billion in the United States between 2015 and 2019 and will start building its new Atlas SUV in Tennessee later this year. Volkswagen has had a plant in Mexico for 50 years and it is not shifting any jobs to Mexico from the United States. "We do not make our investment decisions based on administrative cycles. Our business is really an 8-, 12-, 14-year horizon when we look at investments," Woebcken said on the sidelines of the Detroit auto show.
Right... but just in case, it never hurts to make such a strategic announcement just as Trump is unleashing all the fury of the US manufacturing class on automakers, both foreign and domestic.
A bigger question is whether Fiat is not doing a bigger mistake by focusing on SUVs and pickups at the expense of sedans just as gas prices are set to rise again. U.S. consumers have increasingly shifted toward SUVs and pickup trucks and away from sedans in recent years, as gasoline prices have remained relatively low. A year ago, Marchionne said FCA would cease production of two sedans and focus on SUVs and pickups.
In an example of verbal foreplay that would make a Chinese concubine blush, Marchionne touched on almost everything that was relevant in Fiat's decision, except, well, what was relevant when he said in a statement on Sunday that the lineup changes were due to that consumer shift. "We continue to reinforce the U.S. as a global manufacturing hub" for SUVs and pickup trucks, he added.
And surely Trump's fire and brimstone-spewing twitter altar had absolutely nothing to do with it...