An auto worker at Fiat Chrysler’s plant in Warren, Mich., assembles parts for a Dodge Dart in January, 2016. Last week, FCA announced a $2.5-billion (U.S.) investment in the plant.Jeff Kowalsky/Bloomberg
The Trump administration does not need an 85-per-cent North-American-content rule to address concerns about auto-industry jobs flooding to Mexico, Fiat Chrysler Automobiles NV chief executive Sergio Marchionne says.
Mr. Marchionne said his company's announcement last week that it will shift production of its heavy-duty pickup trucks out of Mexico to Michigan should address "some of President Trump's concerns about the dislocation of production capacity out of the United States."
Mr. Trump has threatened to tear up the North American free-trade agreement and has singled out the creation of auto-industry jobs in Mexico as one way the trade deal has damaged the U.S. economy. The Americans have proposed during NAFTA negotiations that North American content be set at 85 per cent, in order for vehicles to qualify for duty-free shipment, and that vehicles made in Canada and Mexico have 50-per-cent U.S. content if they are to be exported to the U.S. market duty-free.
Fiat Chrysler said last week it will invest $2.5-billion (U.S.) in Warren, Mich., and create 2,500 jobs there by shifting production.
"I don't think we need to go to the 85 number to address what President Trump's concerns are," Mr. Marchionne said.
Production was shifted in part because of the danger of NAFTA ending and the U.S. government imposing its so-called "chicken tariff" on imports of pickup trucks from Mexico, Mr. Marchionne acknowledged on Monday during a media roundtable at the North American International Auto Show in Detroit.
"The risk of the so-called chicken tax … would have been almost lethal to the business," he said. He also noted that it will cost the company more to make the pickups in Warren than in Mexico, but 90 per cent of them are sold in the United States.
"We have found our way of dealing with the issue," he said.
That move will insulate Fiat Chrysler should NAFTA end and the United States go back to World Trade Organization tariffs. Under the WTO regime, the U.S. tariff on pickup trucks is 25 per cent.
The chicken tariff is also a risk for General Motors Co. as The Globe and Mail reported in October. GM will begin pickup-truck production in Oshawa, Ont., next month, and if NAFTA and the Canada-U.S. free-trade agreement are torn up by the Americans, the 25-per-cent levy will be applied to Oshawa-built pickups sent to the U.S. market.
Dieter Zetsche, chairman of Daimler AG, which owns Mercedes-Benz, said he believes there are very few vehicles assembled in North America that meet the 85-per-cent threshold set by the Americans at the NAFTA negotiating table.
"The question is: Can we get there?" he said to a group of reporters in Detroit.
Mr. Zetsche said the technological change transforming the industry and political uncertainty in various global locations mean the auto maker must be as flexible as possible.
Ford Motor Co. executive vice-president and global operations president Joe Hinrichs said the Dearborn, Mich.-based company will not reveal publicly whether any of its North American-built vehicles contain 85-per-cent content from the three NAFTA countries.
"We've done the math, we've done the analysis, I can tell you 85 is a very difficult number for the industry to hit," Mr. Hinrichs said.
But any new NAFTA agreement should contain a clause preventing currency manipulation, he said.
Ford does not believe Canada and Mexico are manipulating their currencies, but such a clause would serve as a template for other free-trade deals the United States signs, he said.
The imposition of a 25-per-cent tariff on pickup trucks would not affect Ford, because U.S. assembly plants build all of the company's pickup trucks.