Automakers Ask Donald Trump to Relax Fuel Standards; UAW Wants to Unravel NAFTA

DETROIT, MI — President-elect Donald J. Trump made Detroit and Michigan’s auto industry a central theme in his campaign with promises to broker better trade deals or dismantle them all together and to impose stiff tariffs on automakers that move jobs out of the country. Now the auto industry is asking for something from him: relaxed gas mileage standards put in place by the Obama administration.

In a memo to Trump’s transition team Thursday, the Washington, D.C.-based auto industry lobbying group, the Alliance of Automobile Manufacturers, said stringent gas mileage rules “pose a substantial challenge to the auto sector” and urged him to “harmonize and adjust” the rules.

“These market factors are absolutely critical since automakers are ultimately judged by what consumers take out of showrooms across America, rather than what automakers put into those showrooms,” the auto alliance wrote in the memo. “The combination of low gas prices and the existing fuel-efficiency gains from the early years of the program is undercutting consumer willingness to buy the vehicles with more expensive alternative powertrains that are necessary for the sector to comply with the more stringent standards in out-years.”

A report on emissions standards released by federal regulators “over-projects technology efficiencies and inadequately accounts for consumer acceptance and marketplace realities,” the group wrote.

Also Thursday, United Auto Workers President Dennis Williams said the UAW wants to work with Trump to either fix or dismantle the North American Free Trade Agreement, which the president-elect has said has “destroyed our country.”

“I am prepared to sit down and talk to him about trade,” Williams said at a news conference. “NAFTA is a problem. It is a huge problem to the American people.”

NAFTA, which took effect in 1994, significantly changed how the United States does business with Mexico because it virtually eliminated tariffs between the two countries. Detroit’s Big 3 automakers — Ford, General Motors and Chrysler Fiat — all have operations in Mexico, as do Nissan, Kia and most others competing in a global market.

Executives at Ford, which has said it will move production of its entire fleet of small cars to Mexico by 2017, have famously sparred with Trump over the then-candidate’s assertions that Ford is leaving the United States entirely and planned to fire all of its U.S.-based employees.

Early in the campaign at a rally in Walker, Michigan, Trump said that if Ford CEO Mark Fields didn’t acquiesce to his demand that he bring production back to the United States, a proposed 35 percent tariff would increase to 40 percent. Ford Executive Chairman Bill Ford Jr., who met with then-candidate Trump earlier this fall, called Trump both “infuriating” and “frustrating.”

It’s unclear exactly how Trump would go about dismantling trade deals. Presidents do have the power to scrap trade deals without the approval of Congress, but the United States hasn’t withdrawn from a major trade agreement since 1866, according to CNN Money.

Williams acknowledged it wouldn’t be easy. Automakers and auto suppliers have spent billions of dollars on production plants in Mexico, which has surpassed Canada as the No. 2 automaker in North America. Pulling out of NAFTA now could throw the auto industry, which finished its strongest year in modern history in 2015, into a tailspin.

“We will work with president-elect Trump as much as we can,” the union chief said. “We have always been very critical about trade agreements that did not protect American jobs, and American workers, and have been very vocal on it and very tough on it.”

Williams supports Trump’s idea of a 35 percent tariff on vehicles and parts produced in Mexico and coming back into the United States, despite a World Trade Organization rule that bars punitive tariffs on a single company.

Trump’s critics argue higher tariffs and other trade barriers would result in a steep increase in new car prices, and perhaps through the industry that employs most UAW workers into turmoil.

“I think that companies ought to build where they sell. I look at the amount of money that General Motors, and Ford, Toyota, Nissan and others are putting into Mexico....and the majority of their products are being sent back up here to be sold…that is jobs walking away from the American citizens, and our communities, and our states,” Williams said.

Williams said he hasn’t seen the memo to the transition team about mileage standards, but the UAW has been concerned about how quickly automakers are expected to implement them. The first vehicles manufactured under the standards, known as the Corporate Average Fuel Economy standards, are on showroom floors now, and the standards become gradually stricter through the 2025 model years.

The auto alliance represents most of the major auto manufacturers, including the Big 3, BMW Group, Jaguar Land Rover, Mazda, Mercedes-Benz USA, Mitsubishi Motors, Porsche, Toyota, Volkswagen Group of America and Volvo Car USA.

Photo by Brian Snelson via Flickr Commons