Auto Industry Closes Ranks to Oppose Trump's Tariff Threats

(Bloomberg) -- Automotive companies on both sides of the Atlantic pushed back on President Donald Trump’s talk of a trade war with Europe using a similar refrain: Everyone will suffer if his rhetoric becomes reality.

“Tariffs are not good for anybody,” Steven Armstrong, head of Ford Motor Co.’s European operations, said Tuesday in a Bloomberg Television interview at the Geneva International Motor Show. “Any form of tariff is going to be bad news for us and lift our costs, and we’re going to pass that through, probably to the consumer.”

Big automakers like Volkswagen AG and Toyota Motor Corp., smaller manufacturers such as Volvo Cars and PSA Group and even a group representing American auto dealers echoed the sentiment in the wake of a tit-for-tat between Trump and European Commission President Jean-Claude Juncker. The comments suggest the auto industry could form a unified front after the president tweeted he could slap levies on BMWs, Audis and other cars shipped from Europe if the U.S.’s planned tariffs on imported steel and aluminum are met with retaliation.

The war of words adds to uncertainty for the auto industry already dealing with disruption stemming from volatile political environments, the decline of diesel and the advent of self-driving technology.

“The world is already chaos, so a little bit more, a little bit less, it’s already chaos,” Carlos Tavares, CEO of PSA Group, the maker of Peugeot, Citroen and Opel vehicles, said in an interview in Geneva. “It’s better that we have an open world where we can trade peacefully.”

Trump tweeted over the weekend that European cars “freely pour” into the U.S. and have created a “big trade imbalance.” But with more and more German cars made in America, the nation’s deficit with Europe’s largest economy narrowed to about 64,000 vehicles last year.

Volvo Cars CEO Hakan Samuelsson said that tariffs could affect the carmaker’s plans to export from a plant it’s building in South Carolina, where half of the 4,000 projected jobs are tied to shipping S60 sedans and XC90 sport utility vehicles to overseas markets.

‘No Winner’

“There’s no winner in any trade war,” Didier Leroy, executive vice president at Toyota, said in an interview in Geneva. “The risk is for the end customer, who’ll feel the financial impact because he’ll probably pay more.”

The steel and aluminum tariffs Trump announced last week touched off a firestorm that could compromise negotiations to rework the North American Free Trade Agreement. U.S. Trade Representative Robert Lighthizer said time is running out to redo the accord as Canada and Mexico pushed back against the levies that the president hasn’t yet finalized.

“I think the American government knows that in the past we had agreements like Nafta that shouldn’t just be destroyed on a whim,” Volkswagen CEO Matthias Mueller said. “We all put our efforts into globalization in the past decades, and I think we shouldn’t give up that idea so easily.”

Combined, German car factories in the U.S. produced 804,000 vehicles last year, with 430,000 of those exported outside the country. The number of German cars imported into the U.S. has slid about 20 percent since 2014, to 494,000 vehicles, the VDA said.

GM’s Exit

Trump’s beef likely stems from the lack of U.S. automakers in Europe. While Ford is among the top mass-market brands in the region, General Motors Co. sold its German unit last year after trying and failing to establish the Chevrolet nameplate in Europe. Fiat Chrysler Automobiles NV sells Jeep vehicles in the region, but Dodge and Chrysler models are rarities because of the region’s preference for smaller cars.

German automakers have been pursuing U.S. expansion for years. Since 2013, brands like Mercedes, VW and BMW have added 5,700 jobs, increasing U.S. staffing to 36,500 people, according to the VDA. BMW’s largest facility in the world is in Spartanburg, South Carolina, which makes SUVs including the X3 for customers in Germany and elsewhere, while Volkswagen is expanding production in Chattanooga, Tennessee.

“We are advocates of free trade and hope that’s how it plays out,” said Ford’s Armstrong.

--With assistance from Chris Reiter Birgit Jennen Chad Thomas Jamie Butters Tommaso Ebhardt and Oliver Sachgau

To contact the reporters on this story: Elisabeth Behrmann in Geneva at ebehrmann1@bloomberg.net, Matthew Miller in Geneva at mtmiller@bloomberg.net.

To contact the editors responsible for this story: Craig Trudell at ctrudell1@bloomberg.net, Anthony Palazzo at apalazzo@bloomberg.net, Chris Reiter, Chad Thomas

©2018 Bloomberg L.P.