The American auto industry does not need Trump to stage-manage it

https://www.washingtonpost.com/opinions/the-american-auto-industry-does-not-need-trump-to-stage-manage-it/2017/01/04/d97260c4-d2a1-11e6-9cb0-54ab630851e8_story.html

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John Maynard Keynes wrote that gut feelings — or “animal spirits,” as he called them — were often more important to investment decisions than a “mathematical expectation.”

President-elect Donald Trump, too, understands animal spirits. It’s just that the animal he has in mind is a sheep.

Or so it seems from the way he is forcefully herding American automakers back across the U.S.-Mexico border, like so many wayward ovines — with Twitter as his digital crook.

And if the companies’ response to this blatant political strong-arming of their supposedly free enterprises is any indication, Trump has read Detroit right.

Ford announced Tuesday that it will not be building a planned $1.6 billion small-car plant in Mexico, which Trump had condemned as a betrayal of U.S. workers. Explaining the capitulation on CNBC, Ford chief executive Mark Fields acknowledged his duty to shareholders, but added, “We have to make sure, at the same time, that we have good relations with the various governments that are in power.”

Now there’s a profile in courage. To be sure, Detroit’s suits were never likely leaders of the Resistance, if there is to be one. As Fields’s remark suggests, they long ago ceased being swashbuckling capitalists. Auto companies are more like bureaucratic Gullivers, tied down by union contracts and fuel-efficiency mandates. And that’s not counting the mother of all political entanglements, the 2009 federal bailout of General Motors and Chrysler, begun under President George W. Bush and completed under President Obama.

Managing one of the Big Three is a constant exercise in the art of the possible, which is no doubt why Fields decided Mexico was not the hill to die on.

He’s eyeing a really, really shiny object — deregulation and tax cuts from Trump and the Republican Congress, which could indeed boost Ford, if and when they materialize.

He better hope they do, because otherwise his cave-in to Trump could be a costly move as well as a craven one. Fields, of course, was right about the economics of moving to Mexico: Only pickups, crossovers and SUVs are profitable to assemble in most U.S. factories, because only those better-selling, larger vehicles offset higher U.S. labor costs.

Mexico’s other advantage is free trade with markets around the world, not just with the United States (where small-car demand is weak due to low gas prices). Global openness makes our southern neighbor a good export platform, to which Japanese, Korean, German and American carmakers are flocking.

Trump’s next target is General Motors, which has annoyed him by importing some Chevrolet Cruze hatchbacks from Mexico. GM produces the rest of the relatively few Cruzes it manages to sell in the United States at Lordstown, Ohio, which also happens to be in a county Trump carried in November.

“Make in U.S.A. or pay big border tax!” Trump tweeted — threatening to punish General Motors for the good deed it did by designing and promoting the Cruze, in compliance with federal fuel-economy standards, and building it in Lordstown, to be a good, grateful, corporate citizen after the bailout.

The Cruze has been such a flop that GM recently had to announce cutbacks at Lordstown — though at least it kept that car plant open, unlike bailed-out Fiat Chrysler, which is ceasing U.S. passenger-car production to focus on pickups and the like.

What a role reversal for the two parties: During the bailout, when the Obama Treasury Department actually owned the automakers, these Democratic officials scrupulously kept out of the companies’ business decisions, lest they be politicized, in perception or reality.

What a reversal for the United States and Mexico: The latter once epitomized protectionism and crony capitalism, before free-market reforms recommended by a bipartisan succession of American presidents.

It’s hard to say where the new Republican president’s attitude toward private property and free enterprise might lead. Perhaps Trump is just putting showy pressure on corporate America to offset, in advance, the criticism he’ll get from Democrats for showering the private sector with tax cuts and regulatory relief after Inauguration Day. At least that’s what all the investors who are bidding up stock prices must be thinking.

Or perhaps Trump really does intend to pour money on companies with one hand while tugging on a short leash with the other.

If so, Wall Street bulls may come to regret betting on him; Fields and other chief executives may regret appeasing him. American workers could lose out, too — autoworkers included. When a president can punish you for “killing” jobs, the smart business plan is not hiring anyone in the first place — except robots.

America’s business climate is strong. The way to weaken it is to give a politician say-so over investment, even, or maybe especially, if that politician calls himself a businessman.

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