Automakers Bristle at Trump Administration Demand for Sensitive Data

(Bloomberg) -- The U.S. Commerce Department has asked automakers to reveal some of their most closely held secrets as part of its investigation of whether tariffs on imported cars and components are needed to safeguard national security.

A 34-page questionnaire from the department’s Bureau of Industry and Security was sent to several automakers this month, seeking sensitive details about company finances, factories, supply chains and other topics.

“The breadth and depth of this request is invasive, requiring massive amounts of proprietary and confidential business data from global operations -- all under the pretense of national security,” said Gloria Bergquist, spokeswoman for the Alliance of Automobile Manufacturers, which represents several carmakers who received the survey.

The alliance represents a dozen companies including General Motors Co., Toyota Motor Corp. and Volkswagen AG.

“Frankly, it’s stunning from an administration committed to getting government out of the way of business,” Bergquist said.

The survey’s cover page says recipients are required by law to respond to the survey, and those who don’t could be sentenced to as long as a year in prison and a $10,000 fine.

A department representative didn’t immediately respond to a request for comment.

National Security

The questionnaire is part of an investigation begun in May into whether imports of autos and auto parts hurt U.S. national security. The probe is being conducted using a rarely used 1960s trade law that President Donald Trump employed earlier this year to impose tariffs on steel and aluminum imports.

“There is evidence suggesting that, for decades, imports from abroad have eroded our domestic auto industry,” said Commerce Secretary Wilbur Ross said when announcing the investigation. “The Department of Commerce will conduct a thorough, fair, and transparent investigation into whether such imports are weakening our internal economy and may impair the national security.”

Car companies and auto parts makers have warned in submissions to the Commerce Department that tariffs would damage their businesses, in part by disrupting their supply chains, and would raise costs for consumers.

Under the Section 232 of the the Trade Expansion Act of 1962, Ross has until February to wrap up the probe and make recommendations to Trump, who’s threatened to slap tariffs of as much as 25 percent on imported cars.

Automakers Undressed

The Commerce Department’s questionnaire asked companies for sensitive information beyond what they disclose in public filings with the U.S. Securities and Exchange Commission. The Trump administration wants such things as how much each company’s research budget goes to specific areas such as autonomous driving, electric drive, connected vehicles, and lightweight technology. The questionnaire also seeks a list of suppliers for major vehicles systems and where they’re located.

The Trump administration also wants details about company business plans from now until 2020. One section of the questionnaire asked for plans for every global plant, requiring the the companies to reveal whether the plants will be expanded, contracted, modernized, or closed. The administration also asked the companies for explanations about why they manufacture in foreign trade zones.

The survey also asks if imports hurt sales, profits or margins. And it directly asks,
“How has import competition affected your U.S. manufacturing operations, sales, employment, planned expansions, investments, etc. with respect to the production of passenger cars, light trucks, SUVS and vans from 2013 to Q2 2018.”

The Commerce Department has scheduled a hearing on the investigation for July 19 in Washington. About 45 people, representing foreign and domestic companies, labor, and others, are scheduled to testify. The hearing was originally slated to take place over two days but Commerce announced Thursday that it would be limited to one day.

Dave Sullivan, an auto industry analyst at AutoPacific Inc., said the level of detail sought by the government is “disturbing.”

“The only time I’ve seen something like that is when a supplier is not doing very well financially and the automaker is trying to understand their financial state and their future,” he said. “They’re fully undressing automakers and how they do their business to a disturbing level.”

Defense Sector

The Bureau of Industry and Security has conducted dozens of industrial base surveys in the past, mostly focusing on sectors closely linked to the defense industry, said Susan Helper, a former chief economist of the Commerce Department during the Obama administration and and now a professor at Case Western Reserve University in Cleveland.

“This is a consequence of the Trump administration’s expanded definition of national security I hadn’t thought about,” said Helper. “I can see both sides on this -- it is burdensome for companies, but on the other hand it’s important for policy makers to understand global supply chains as they have an increasing impact on the U.S. economy.”

The survey is a sign that the Commerce Department has “no case” that imported autos and parts put national security in jeopardy, said John Bozzella, president of the Association of Global Automakers, a major trade association for several foreign-based auto companies doing business in the U.S., including Honda Motor Co. and Nissan Motor Co.

“They couldn’t articulate a case when they started the investigation, they haven’t seen a case made in the over 2,000 substantive comments that were filed, and they are still looking for one,” Bozzella said.

--With assistance from Joe Deaux.

To contact the reporters on this story: Ryan Beene in Washington at rbeene@bloomberg.net;Jenny Leonard in Washington at jleonard67@bloomberg.net;David Welch in Southfield at dwelch12@bloomberg.net

To contact the editors responsible for this story: Jon Morgan at jmorgan97@bloomberg.net, Ros Krasny

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