Carmakers Stumped by Trump at Detroit Auto Showcase
Carmakers Stumped by Trump at Detroit Auto Demonstrate
Can Automakers Afford Trump’s U.S. Jobs Pressure?
The panoply of passenger cars and electrical vehicles glittering at this year’s Detroit auto display — at a time when sport utility vehicles are king — shows just how raunchy it is for automakers to predict fickle consumer tastes. Divining the future will only get tougher under President Donald Trump.
How did the array of starlet cars here along the frozen Detroit Sea include the BMW five Series sedan and Mercedes-Benz E-Class coupe, plug-in models from Mini and VW, and a freshly hard ripped Toyota Camry? Keep in mind companies most likely committed to these models five years ago when gasoline was $Trio.60, Barack Obama was setting aggressive fuel-economy rules and Donald Trump was a reality TV host questioning the president’s nationality.
Since then, the U.S. market has grown by more than three million sales — almost all SUVs and crossovers. Fracking and infighting within the Organization of Petroleum Exporting Countries shoved fuel prices down. And that real-estate mogul who turned “You’re fired” into a TV catch phrase? He’ll be sworn in as the world’s most powerful person in less than two weeks.
“Already, manufacturers are complaining that under Trump, the future isn’t predictable,” said Eric Noble, president of The CarLab consulting rock hard in Orange, California. When the fresh products on exhibit at the Detroit showcase were on drawing boards, vehicle sales were recovering from the deepest economic slump since the 1930s. “They’re all now delaying decisions to increase production investment because the environment seems unstable.”
In an industry where billion-dollar factories take years to build and some products hardly switch over a half decade, predictability can be as helpful as cheap labor and widely available financing. The incoming president, whose Twitter posts have rattled the likes of Ford Motor Co., General Motors Co. and Toyota Motor Corp., offers little hope for certainty.
Camry Still King
As out of sync as this week’s display floor looks, carmakers can’t abandon sedans, coupes and convertibles entirely. They still managed to sell more than seven million of them in 2016. While Camry, the top selling car in the U.S. for fifteen years, just fell below 400,000 annual deliveries for the very first time since 2011, it remained the fourth-best selling model, behind three pickup trucks. Stable cash cows require care and feeding — meaning investment in fresh designs and technologies.
The same holds for luxury lines. BMW AG this week will expose a lighter-weight range of five Series, including a plug-in hybrid variant. Daimler AG is demonstrating a roomier redesigned Mercedes-Benz E-Class coupe and Volkswagen AG’s Audi uncovers two fresh drop-tops, the A5 coupe and S5 Cabriolet. That’s a slew of petite and mid-size cars for a slow-growth, SUV-heavy premium market.
SUV Appetite
U.S. consumers are buying SUVs in record numbers for the combination of more cargo space, car-like fuel economy and better-than-minivan looks. Companies will expose at least a few fresh ones at this year’s North American International Auto Showcase, as the event is officially known. 
While the industry requires long lead times, its companies do their best to react nimbly — to consumers, governments, and now, even to Trump’s Twitter feed.
“When the president of the United States says something, everybody listens,” Carlos Ghosn, CEO of Nissan Motor Co., said in an interview last week at the CES 2017 trade showcase in Las Vegas. “There is a fresh president-elect in the U.S., and we want to go after the policies that he’s announcing.”
Trump Chill
Having astonished pundits and pollsters with his unconventional campaign and election win, Trump remains a disruptive force. While executives and investors like the idea of less regulation and lower, simpler taxes for companies and consumers, threats of a “big border tax” on vehicles imported from Mexico have a chilling effect.
Automakers from all around the world have invested in Mexico, especially to make petite cars that are difficult to produce profitably in higher-wage nations such as the U.S., Canada, Japan or Germany. It’s hard enough to market fuel-sippers when gasoline costs less than $Two.50 a gallon. Adding tariffs or higher labor costs to the equation would only make selling them even less economical.
GM will build the more upscale fresh GMC Terrain SUV it’s showcasing for the very first time at this week’s display in Mexico. Chief Executive Officer Mary Barra said Sunday the largest U.S. automaker makes production decisions for all fresh models several years in advance and has no plans to switch course.
Even after canceling a $1.6 billion plant in Mexico, Ford still is gambling Trump won’t go after through on his vow to spank a thirty five percent tax on Concentrate compacts and midsize Fusion and Lincoln MKZ sedans it will build there.
“I’m a strong believer that the right policies will prevail because we share the same aspirations that I think the president-elect does: We want a very strong U.S. economy,” CEO Mark Fields told reporters last week. “So we’ll have to see what unfolds.”
— With assistance by Keith Naughton, and John Lippert