Major Automakers Urge Trump Administration Don’t Ditch NAFTA

DETROIT (Reuters) -

Global automakers on Monday urged the Trump administration not to terminate the North American Free Trade Agreement and expressed hope the United States, Canada and Mexico can successfully conclude a modernized and improved trade pact.

Fiat Chrysler Automobiles NV (FCA) Chief Executive Sergio Marchionne, who announced last week plans to shift heavy pickup truck production from Mexico to Michigan by 2020, said he hoped the Trump administration would “retune” some of its trade talk demands.

Trump has threatened to withdraw from NAFTA, which is heavily utilized by automakers that have production and supply chains spread across the three countries.

Marchionne, speaking at a news conference at the Detroit auto show, said FCA’s truck production shift in part “goes a long way I think in addressing some of President Trump’s concerns about the dislocation of production capacity out of the United States.”

That decision reduces the risk those trucks would be hit with a 25 percent tariff if NAFTA unravels.

Ford Motor Co CEO Jim Hackett on Sunday told reporters NAFTA needs “to be modernized,” adding that of Detroit’s Big Three automakers, Ford has the highest percentage of U.S.-built vehicles.

“We’ve got a big commitment to our country and it’s proven in the numbers,” he said.

Unlike General Motors Co. and FCA, Ford does not build trucks in Mexico.

Under NAFTA, at least 62.5 percent of the material in a car or light truck made in the region must be from North America to be able to enter the market place tariff-free.

The Trump administration has proposed increasing that minimum NAFTA content to 85 percent, with 50 percent made in the United States.

The 85 percent North American content proposal to avoid tariffs is unworkable, Toyota North America chief executive Jim Lentz told Reuters.

“There’s not a vehicle that meets that,” he said.

The U.S. auto industry has worked to convince the Trump administration of NAFTA’s importance. In October, major automakers, suppliers and auto dealers launched a coalition to back the agreement.