What a Trump Presidency Means for the Auto Industry … and You – Reference Mark

President-elect Donald Trump may shift his rhetoric and policies on a seemingly daily basis, but you can be certain that his administration will have an effect on how the auto industry operates and, in turn, affect the cars you can buy and drive. However, many of Trump’s statements to date raise more questions than answers.

Manufacturing

A key Trump campaign refrain was bringing manufacturing jobs back to the U.S. The auto industry has already added nearly 350,000 jobs in U.S. facilities since 2009 (granted, that’s compensating for huge layoffs early in the 2008 recession). But many of these new jobs at auto factories—even unionized ones—don’t pay what they used to. Manufacturing workers once earned a wage significantly higher than the U.S. average, but by 2013, the average factory worker made 8 percent below the median wage. And auto sector workers made even less than that, according to the National Employment Law Project. Trump won the vote in 12 of 14 states with car-manufacturing plants (winning over many union voters in the process). So how well-paying will these new factory jobs be? And if there is wage strife at these new plants, how will his pro-business administration react?

Trade

Trump blistered Ford for moving small-car manufacturing to Mexico and GM for its $5 billion expansion there. He has threatened to impose tariffs on cars imported from NAFTA assembly plants—which means Canada and Mexico. Global automakers imported more than 2 million vehicles from Mexico into the U.S. in 2015. That’s one in eight new cars sold here. No word on what Trump thinks of foreign automakers such as Toyota, BMW, Honda, and Hyundai continuing their manufacturing expansion in the low-cost American South—building their vehicles here but taking the profits overseas. And Trump’s pledge to cancel the Trans-Pacific Partnership could cause major trade upheaval with Japanese and Korean automakers.

Fuel economy

Automakers have begun lobbying the Environmental Protection Agency to relax the 54.5-mpg CAFE standard due in 2025. Although there have been great fuel economy gains achieved, the current cheap-gas situation means consumers are buying bigger, thirstier cars, SUVs, and trucks. That wrecks any automaker’s CAFE rating regardless of good intentions. A Trump senior policy adviser said the new administration would conduct “a review of the fuel economy and emissions standards to make sure they are not harming consumers or American workers.” Speaking of emissions …

The EPA

Trump alarmed environmentalists by appointing climate-change skeptic Myron Ebell to lead the EPA transition team. Ebell is chairman of the Cooler Heads Coalition, whose mission is “focused on dispelling the myths of global warming by exposing flawed economic, scientific, and risk analysis.” Given that, it seems as though regulation and enforcement could be on the wane. However, California Governor Jerry Brown has said his state will continue to hold to its stricter environmental standards. Nine other states, including New York and Massachusetts, follow California’s emissions laws, meaning a clash between federal and state regulations could be in the offing.

Electric cars

One attractive part of buying an EV is the $7,500 federal tax credit. But Trump’s claim to slash wasteful government spending could make this a coveted (albeit symbolic) line item to eliminate. That could put a sting in the launch of the Tesla Model 3 and Chevrolet Bolt EV. That said, California still has its ZEV initiative, followed by nine other states, which requires that 15 percent of car sales be zero-emission vehicles by 2025.

Financing

Despite his populist posturing, Trump and the Republican leadership have given signals that they will defang the Consumer Financial Protection Bureau. The National Law Journal predicted that Trump administration will “soften the agency’s enforcement approach.” The CFPB has battled discriminatory lending practices in auto loans, such as forced arbitration, artificially inflating interest rates, indulging in high-risk subprime loans, and shady debt-collection practices. As the CFPB has already been a Beltway hot potato in terms of its aggressive regulation, this agency could be gutted by a Trump administration.

Summary

Despite Trump’s campaign promises to topple Washington’s status quo, it may prove difficult to unwind decades of intertwined regulation without consequences. Expect lawmakers to have a field day determining what new policies can effectively be enacted.

More by Mark Rechtin:

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• Cadillac’s Future Design Highlighted in Escala Concept
• Cadillac’s Johan De Nysschen on Escala, Cue and How the Brand Can Improve

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