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Join the Swamp, Toyota

Carmakers have never been big lobbyists. That will have to change.
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The world's auto industry must be feeling nostalgic about the days when what was good for General Motors Co. was good for America.

President-elect Donald Trump's Twitter feed has praised Ford Motor Co. for "scrapping a new plant in Mexico" and threatened GM with a "big border tax" on imported Chevies. Then on Thursday he told Toyota Motor Corp. it faces import duties if the company builds a new plant 1 south of the border, driving the stock down as much as 3 percent in Tokyo and marking a first shot across the bows of foreign automakers.

Leaving to one side the spiraling debates about the facts of these statements, the current situation is still perilous for the industry. Getting into a Twitter spat is never a great idea -- least of all with @realDonaldTrump. And while companies might grumble about whether the collateral damage to their public images is justified, brazening it out in a war with the president is rarely a viable strategy in a consumer-focused industry: Remember that thing about how the customer is always right?

Oil on Troubled Waters

BP closed about 40 percent of its U.S. retail outlets in the wake of the 2010 Deepwater Horizon oil spill

Source: Bloomberg

In case of any doubt about this, look what happened to BP Plc's U.S. retail network after the 2010 Deepwater Horizon oil spill. The disaster didn't affect the price or quality of BP's gasoline, but the number of retail sites in the country dropped about 40 percent.

Trading Places

Net U.S. imports of passenger vehicles, by country

Source: U.S. Trade Administration, Gadfly calculations

Whether Donald Trump likes it or not, the U.S. auto industry is deeply integrated with cross-border trade. About one-third of the passenger vehicles sold in the U.S. are imports, 2 according to figures from the Department of Commerce, and two-way trade in parts and finished cars amounts to more than $450 billion a year.

It Takes Two to Tango

Bilateral U.S. trade in auto parts and finished vehicles amounts to more than $450 billion a year

Source: U.S. Department of Commerce

Note: Import figures are shown as negative numbers to reflect impact on trade balance. There may be some double-counting in terms of finished vehicles -- for instance when parts imports or exports are used in vehicles which are sent back to the country where the parts were made.

That scale of integration puts the industry between a rock and a hard place. Try to fight the tide of presidential disapproval, and you end up like King Canute, but taking pre-emptive action to avoid it is inconceivable. Even the most cautious manufacturer won't disrupt multi-billion-dollar global supply chains it's spent decades building out of fear of a tweet.

There is another way. The auto industry tends to be surprisingly modest in its outlays on lobbying: It spent less during 2015 than the civil service, the entertainment industry, real estate or education, according to the Center for Responsive Politics. Relative to the giants of corporate influence in Washington, such as pharmaceuticals, insurance, electrical utilities, electronics manufacturing, and oil and gas, it's a minnow.

Such outlays can be a useful way of shaping policy. When the growth of unconventional shale resources brought the energy industry into conflict with farmers and householders in the late 2000s, oil and gas companies and associations sharply ramped up spending in Washington, to ensure the playing field was skewed in their favor.

Carmakers as a whole have been smaller players in lobbying because they've often been able to lean on the grassroots influence of their dealership networks, which have a presence in pretty much every congressional district. In the years after the 2009 bankruptcies of General Motors and Chrysler, too much money spent lobbying the government that bailed out Detroit also risked looking unseemly.

Spend Money to Make Money

The auto industry hasn't kept pace with lobbying spending by other sectors

Source: Center for Responsive Politics

Those times are past. Carmakers' best defense now against executive actions and rhetoric from a Trump White House is a Congress that is firmly on their side. Ethics aren't at quite such a premium in Washington these days, and the auto industry is in a fight for survival, so it can't afford to be picky. It's time to join the swamp.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
  1. The site he mentioned in his tweet, in Baja, has been in operation since 2004. Trump appears to mean the Guanajuato plant that's due to open in 2019.

  2. Based on imports of passenger cars net of exports as a proportion of total light vehicle sales.

To contact the author of this story:
David Fickling in Sydney at

To contact the editor responsible for this story:
Paul Sillitoe at

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