This coming week, I’ll be driving to Detroit to cover the North American International Auto Show.
I did the same thing last year, and once again my route will take me through Lordstown, Ohio – right past the factory where General Motors’ Chevy division builds the Cruze, a compact sedan that’s among the most successful vehicle GM has ever sold.
You can’t miss the Cruze pride at Lordstown: There’s a gigantic banner of the car on the side of the factory. Since 2010, nearly every Cruze sold in the US or Canada – that’s well over a million cars since 2010 – has rolled off the Lordstown assembly line.
With sales that could cross 4 million globally in the next year or so, the Cruze is an amazing story for GM, a carmaker that had effectively abandoned the small-car market in the US before the financial crisis.
President-elect Donald Trump has made the Cruze and GM his latest Twitter target, threatening GM with a border tax because the automaker thought it might be a good idea to bring a few Mexican-made hatchback versions of the Cruze into the US to see if adding a trim level in the second half of 2016 would enhance the Cruze story and give dealers a vehicle with more SUV-like functionality in a booming SUV market.
Trump has no understanding of the modern, global auto industry, and yet he isn’t afraid to take to Twitter to show off his ignorance. The fact is that the Cruze is built on a global manufacturing platform and sold worldwide in numerous markets under GM’s different regional brands.
Interestingly, the auto industry doesn’t seem to care what Trump tweets – it quickly figured out that he’s using Twitter to bolster his Save American Manufacturing Jobs pledge. Eventually, the markets will also figure this out and stop knocking a percentage point or two off automakers’ stock prices every time Trump turns to 140-character brinkmanship.
US car companies build cars all over the place, and at times they bring cars into markets from outside those markets. The car I’ll be driving to Detroit is a Buick made in China.
GM didn’t immediately respond to my request for comment, but in a statement to CNBC the auto giant said that they imported and sold only a tiny number of Cruze hatches from Mexico.
“General Motors manufactures the Chevrolet Cruze sedan in Lordstown, Ohio. All Chevrolet Cruze sedans sold in the U.S. are built by GM’s assembly plant in Lordstown, Ohio. GM builds the Chevrolet Cruze hatchback for global markets in Mexico, will a small number sold in the U.S.,” the statement reads.
The auto industry has already shifted its Trump strategy to what it really wants, which is for his administration to push back or eliminate higher Corporate Average Fuel Economy (CAFE) standards. The carmakers have been lobbying for a break on these, even as they stay on track to achieve the higher mandates. The problem is that they don’t want to be building the slow-selling small cars and alternative-fuel vehicles that are required to comply with the regulations, when they can be rolling hot-selling, profitable trucks and SUVs.
Ironically, bringing some Cruzes in from Mexico is a way to forestall additional layoffs at the Lordstown plant. The lines there are scheduled to be idled for a week later this month, and a third shift will be discontinued as well, according to reports.
- Markets Insider
Cruze sales have been declining as the market turns to favor SUVs. GM isn’t going to drop the vehicle, but it is trying to figure out how to keep it going in the US. That’s where the hatchback came in.
Get it? Importing some stock from Mexico was a job-preserving strategy.
Everyone in the auto industry knows this. Ford was attacked by Trump for doing the same thing. Executives might have been initially ruffled by the soon-to-be Tweeter-in-Chief, but they’ve figured out his game. If a border tax does arrive, the carmakers will simply shift production on US market vehicles to US plants.
Unfortunately, by losing their multi-country safety valves – the ability to shift inventory around based in demand or temporary market conditions – American autoworkers’ jobs will be a greater risk.
I’ll remember that when I drive by Lordstown this weekend.