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Category: Business, Economics and Finance / Manufacturing

Trump threatens GM with 'big border tax' as Ford cancels Mexico plant plans

Wednesday, 4 Jan 2017 05:13:22

US president-elect meets workers at an air conditioning company where he announces deal to save jobs. (AP: Evan Vucci)

President-elect Donald Trump has threatened to impose a "big border tax" on General Motors Co for making some of its Chevrolet Cruze compact cars in Mexico, an arrangement the largest US automaker defended as part of its strategy to serve global customers.

Key points

  • Donald Trump threatens to tax American's third-biggest carmaker
  • Ford cancels Mexico factory in vote of confidence for Trump
  • Auto union is not protesting GM production in Mexico

Mr Trump's comments marked his latest broadside aimed at an American company over jobs, imports and costs before he takes office on January 20, signalling an uncommon degree of intervention for an incoming US president into corporate affairs.

Mr Trump tweeted that GM is sending Mexican-made Cruzes to the US tax-free. He told GM to make the cars in the US "or pay big border tax!".

External Link: @realDonaldTrump: ''General Motors is sending Mexican made model of Chevy Cruze to U.S. car dealers-tax free across border. Make in U.S.A.or pay big border tax!'

He did not provide further details but has previously vowed to hit companies that shift production from America to other countries with a 35 per cent tax on their exports into the United States.

He also has denounced the North American Free Trade Agreement between the United States, Mexico and Canada.

GM, the world's number three automaker, said it sold about 190,000 Cruze cars in the United States in 2016, with about 185,500 made in Lordstown, Ohio.

About 4,500 hatchback versions of the Cruze were assembled in Mexico and sold in the United States.

Cruze hatchback production amounts to less than a day of output at the Lordstown plant, said Glenn Johnson, president of a United Auto Workers union local at the factory.

The union, he said, is not protesting the move to build the hatch in Mexico.

"It makes for news, that's all," Mr Johnson said of the tweet, saying the Lordstown factory is not equipped to build the hatchback model.

Ford cancels Mexican plant plan

The tweet came hours before GM's rival Ford Motor Co announced it would cancel a planned $US1.6 billion ($2.2 billion) factory in Mexico and would invest $US700 million ($969 million) at a Michigan factory, after it also came under criticism from the Republican President-elect for its Mexican investment plans.

Ford's executive chairman, Bill Ford Jr, said he personally notified Mr Trump of the decision after Mr Trump's early-morning GM tweet.

Ford said last spring it would move production of the Ford Focus small car to the new plant from Michigan.

Mr Trump has repeatedly criticised the plan, and Ford was among the companies he threatened to hit with the 35 per cent tariff on products made in Mexico.

Ford will still move production of the Focus to Mexico, but it will go to an existing plant in Hermosillo that makes midsize cars.

"This is a vote of confidence for President-elect Trump," Ford CEO Mark Fields said at the company's plant in Flat Rock.

Shares of GM rose 1 per cent to $US35.19 after falling about 1 per cent following Mr Trump's tweet before the market opened.

Since winning the November 8 presidential election, Mr Trump has targeted GM's rival Ford Motor Co, United Technologies Inc, Boeing Co and Lockheed Martin Corp.

Mr Trump also has touted decisions by companies to keep some production in the United States, including United's Carrier unit in Indiana.

"In this case, the tweet was specific to General Motors. But I think you've seen an overall philosophy during the campaign and since he was elected to stand up for American workers and make sure that American companies don't benefit from moving their companies overseas and leaving American workers behind," Trump transition team spokesman Sean Spicer said.

Reuters/AP

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