Hecho en Mexico.

Photographer: Susana Gonzalez/Bloomberg

Trump's Twitter Bully Pulpit Has Automakers on Edge

Edward Niedermeyer, an auto-industry analyst, is the co-founder of Daily Kanban and the former editor of the blog The Truth About Cars.
Read More.
( Updated
)
a | A

If there are two traits I share with the new president-elect, it’s an interest in the auto industry and a love of Twitter. The car business is an enormous and deeply influential entity whose daily decisions affect thousands of jobs around the world, but Twitter gives even the most shy and retiring of us a chance to exert influence, too.

At least that’s the lesson I take away from Donald Trump’s series of auto industry tweets last week, in which the president-elect alternately berated and praised automakers that were making and unmaking plans to build cars in Mexico. Trump’s path forward on policies aimed at stemming the flow of manufacturing jobs to Mexico may be uncertain, but his tweets have already changed the game.

For decades, automakers have grown accustomed to politicians treating them as partners. Mayors and lawmakers show up to bask in the job-growing glow of every new announcement and pretend they've never heard about overseas plants and imported models. After the bailouts of GM and Chrysler, politicians became more careful than ever to highlight only the good news.

The problem with this cozy arrangement is that the bailout only slowed the shutdown of U.S. auto plants, while the flood of new investments in Mexico (and China) grew unabated. Despite record profits, automakers shuffled ever-more new production south of the border while the politicians who took credit for rescuing them kept quiet. The result was a simmering resentment among auto workers, whose anger Trump rode to the best showing of a Republican among union households since Ronald Reagan.

Trump has now given voice to this Rust Belt angst in a series of tweets, lambasting GM and Toyota for their planned and present Mexican production while praising Ford for canceling its $1.6 billion factory planned for the state of San Luis Potosi. Trump had targeted Ford’s Mexico investments throughout the campaign, and the automaker’s about-face showed the extent to which car builders are seeking to placate the next president. Though Ford’s Focus compact car will still be built at an existing Mexican plant, the company emphasized investments in U.S. plants and gave Trump’s “pro-growth” policies credit for its decision.

Of course cynics will point out that this decision will actually save Ford $500 million; that the canceling of the new plant had a lot more to do with slow demand for compact cars than Trump’s tweets; and that low margins on smaller cars mean that American workers (especially those represented by the United Auto Workers) are unlikely to win new work building them. These facts show just how complex plant investment decisions really are, and suggest that Trump’s tweets may be less effective in cases where his target’s interests are less aligned with his own.

Still, it's worth considering that Trump’s tweets may be one of the best developments for American auto jobs in years. Ford’s real decision to cancel the Mexico plant may have been heavily motivated by business concerns, but by giving Trump the credit they probably hoped to send him looking for other targets. And sure enough, Trump immediately went after GM’s decision to import Chevrolet Cruzes from Mexico, prompting an extremely misleading statement from the company (which I debunked on Twitter). From there, Trump went after Toyota, which promised not to reduce U.S. employment as a result of any Mexico investments. At this week’s Detroit Auto Show, automakers are falling over themselves to tout their investments in US jobs. These may be mostly symbolic victories, but they show that Trump’s tweets have shaken down the old, apathetic order.

Of course Trump's use of Twitter as a medium says less about social media than about the power of the presidential bully pulpit -- and that he could have had equal influence through speeches or press releases or interviews. But I think Twitter gives the president-elect two unique advantages over traditional media approaches.

First, Twitter not only gives Trump message control but it also makes him more relatable. The way he uses it to troll and bully is relatable to a lot of Americans, because a lot of people use Twitter to bully and troll as a way of feeling as if they have some kind of control over their lives. Trump is probably doing it for the same reason: For all his power, he can't control the media, and his tweets clearly reflect his frustration with that state of affairs.

Second, Trump obviously doesn't have a clear policy here. If he tried to get reporters to write a story about his bashing automakers for Mexico plans, the journalists would likely ask a lot of questions and bring up a lot of annoying context, some of which might mitigate his message. On Twitter, the message is direct, and when reporters start trying to fact-check him on the intricacies of trade relations he just moves on to the next tweet and the next topic.

These advantages are balanced by troubling trade-offs. In particular, the media scrutiny Trump seeks to avoid might actually give his scattershot campaign against outsourcing some much-needed focus. Trump seems to lash out at automakers regardless of their relative investments in the U.S. and Mexico, their overall import policy (for example, GM is the only U.S. automaker importing cars from China) or their treatment under past administrations. After all, some argue that the Barack Obama administration drove automakers like Toyota and VW away from U.S. investments with trumped-up regulatory attacks and UAW labor-organizing drives. If automakers can’t figure out how to give Trump what he wants, his tweets may result in the kind of uncertainty that actually discourages investment in U.S. factories.

Perhaps the most important ambiguity for Trump to clarify: how far he is willing to go to stop outsourcing and what -- if any -- compromises he will accept in order to hold off on his threat of a border tax. Would he accept automakers building low-profit sedans in Mexico in order to preserve U.S. jobs building higher-margin trucks, SUVs and luxury cars? Would a potential border tax just be on finished vehicles or would the growing number of imported car parts be taxed as well, driving up the cost of even American-made vehicles? With the U.S. car market at the top of its business cycle, is Trump willing to risk setting off a downturn in demand by enacting tariffs that are sure to raise new car prices?

Underlying these specific policy questions is a broader uncertainty: Does Trump even realize that tariffs are no longer the key consideration for new car plant investments? Currency market volatility is forcing automakers to diversify their production toward a “build where you sell” model, regardless of protectionist measures. In fact, Mexico’s ascendance in the auto industry is fueled more by its trade agreements with the Americas and Europe than low wages. If Trump doesn’t recognize that free trade is critical to attracting new car factories, he’ll soon find his new industry allies turning on him.

Still, as long as he keeps tweeting, Trump has the opportunity to make progress on outsourcing without incurring the thorny and unpredictable consequences of new tariffs. The U.S. is not losing out on auto job growth because of structural issues, and it is capable of competing for almost any new car factory in the Western Hemisphere as long as company executives are willing to actually consider it as an option. The fear of ending up on the wrong side of a Trump tweet might be just the motivation they need to invest seriously in American auto jobs.

(Clarifies that GM has not pledged to never import Cruze sedans from Mexico in seventh paragraph.)

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author of this story:
Edward Niedermeyer at eniedermeye1@bloomberg.net

To contact the editor responsible for this story:
Tobin Harshaw at tharshaw@bloomberg.net