Auto Industry News: Trump Threatens New Tariffs on Mexico as FCA-Renault Merger Sets Precedent in Auto Industry, Plus “Pot for Potholes,” NASCAR, & NHRA

June 3, 2019April 19, 2022 Joe Evans 0 Comments FCA, Mexico, Michigan, NASCAR, NHRA, Renault, Roads, U.S. Tariffs

Yet even more U.S. trade-related news this week, as the Trump administration announces new tariffs on Mexico. Also, the rumored FCA-Renault merger has been officially announced and Michigan residents might face a fuel tax unless they can smoke $10,000 of legal cannabis. Whaaat???

All that, plus an exciting weekend at Pocono Speedway for NASCAR and an incredible Route 66 NHRA Nationals race. Let’s get right into it.

Trump Threatens New Tariffs on Mexico Over Immigration

On Thursday, President Trump announced via Twitter that the U.S. will impose a 5 percent tariff, effective June 10, on all imported Mexican goods, rising incrementally up to 25 percent by October 1 unless Mexico addresses the illegal immigration issue. Though according to acting White House chief of staff Mick Mulvaney, “there’s no specific target [or] percentage.”

President Trump threatens new tariffs on Mexico in an effort to stem illegal migration. — *Source: Twitter*

This is a huge decision by the Trump administration, and one that could have an incredible effect on the American auto industry. According to CNBC, 2.6 billion vehicles were shipped from Mexico into the U.S. last year, constituting roughly 15 percent of all vehicles sold in the states and worth a grand total of $93 billion.

Threats of new tariffs on Mexico have already affected stock prices for American auto industry giants.

Shares for General Motors, Ford, and Fiat Chrysler all took a dip earlier this week, likely in part to the billions each company has invested in both production and suppliers in Mexico. According to Deutsche Bank, both GM and FCA import 29 and 24 percent respectively of their total car and truck parts from Mexico, with Ford importing 17 percent of its vehicles from down south.

Deutsche also pointed out the surprising amount of full-sized pickup trucks with parts originating in Mexico. For example, 41 percent of the 586,000 GM Silverados sold in the U.S. are actually constructed south of the border. In all, experts estimate the new tariffs on Mexico would cost $6.3 billion for GM, $3.3 billion for Ford, and $4.8 billion for Fiat Chrysler.

Unfortunately, it could cost American consumers even more.

“Margins are so thin in the U.S. market right now that there’s no way that any automaker is not going to pass on these tariffs to their customers,” said Janet Lewis, an analyst at Macquarie Securities. “If these tariffs are enacted, everyone loses,” echoes Jessica Caldwell, executive director of industry analysis at Edmunds. “Profits from vehicles like the Silverado keep GM’s lights on, and if you start to put that at risk, it could be disastrous considering they’re already in cost-cutting mode.”

Experts say the tariffs could add more than $10,000 to Mexican-made cars’ and light trucks’ price tags. (Looks like we’ll be shopping certified pre-owned for a little while…)

More than the discomfort these new tariffs on Mexico may have on our wallets, though, are the complications they add to the ratification of the USMCA, or “new NAFTA” with our North American neighbors. Already facing opposition in Congress, this move doesn’t do much in the way of courting goodwill. Here’s hoping these tariffs threats remain just that—threats. And a swift resolution is achieved.

FCA-Renault Merger: The Good, The Bad, The Ugly

Despite the possibility of tariff-related lost profits, Fiat Chrysler confirmed early last week what many have speculated for quite some time: the company is courting a merger with French automaker Renault.

In an official release, FCA said the 50/50 merger would heighten the profile of both companies, making them the third largest automaker by production in the world. This, in turn, could potentially save almost 5 billion euros per year in synergies, merge platforms and powertrains, and dump capital into EVs and other new technologies.

An FCA-Renault merger would make history in the auto sector, and likely set off a boom of new partnerships. — *Source: AUTOFORUM*

While this might seem like a win-win for both companies, there’s a lot of factors complicating a FCA-Renault Merger.

For starters, Renault has an existing “alliance” with Japanese automakers Nissan and Mitsubishi. That means not only would FCA have to appease Renault and its shareholders, but also Nissan and Mitsubishi investors as well. That could be an issue, considering the crazy stuff Nissan has been dealing with recently, some of which complicated its relationship with Renault. Making matters worse is that Nissan already rejected Renault’s advances, when the French automaker wanted to take their partnership to the next level. (Awkwarddd…)

Part of that reason? Yet another complication in this potential deal: the French government’s ownership stake in Renault. When then-economy minister, now-President, Emmanuel Macron doubled the state’s voting rights—much to Nissan’s dismay—it created room for mistrust. However, as Reuters points out, this is one obstacle that may resolve itself, as the FCA-Renault merger promises not to close any plants or eliminate jobs, giving France “an honorable way out of the predicament” it created in 2015.

All and all, an FCA-Renault merger could be the start of something new—and not all bad. New opportunities and shared resources could flow more easily, as well as healthy helpings of stock and millions of dollars. As CNBC points out, several automakers have been entertaining small agreements for survival in a changing auto landscape. An FCA-Renault merger could launch the sector into a full merger and acquisition “bonanza.”

“Pot for Potholes” to Fix Michigan Roads?

News flash: Michigan has a (serious) problem with the condition of its roads. That problem is so big that Michigan Governor Gretchen Whitmer made fixing up the state’s crumbling infrastructure a massive part of her campaign.

While that’s a promise many Michigan residents were happy to hold her to, now comes the larger question of funding. An issue that has led many citizens to propose the state’s newly-implemented 10 percent tax on legal cannabis sales as the solution. And while the idea of “pot for potholes” funding might sound like the natural (and witty) next step, Governor Whitmer was quick to point out the number wouldn’t quite add up.

“At its height, the taxes for marijuana will raise about $42 million dollars per year for infrastructure. We have a $2.5 billion dollar problem,” Whitmet said. “Every man, woman, and child would have to smoke about $2,500 of marijuana a year to fix our roads. And let’s be honest, at that level no one’s gonna care about the damn roads.”

Citizens propose a Pot for Potholes solution for Michigan's bad roads, per the state's new cannabis tax. — *Source: Detroit Free Press*

If you think the idea of every person in the state buying $2,500 worth of legal weed seems crazy, it gets even more unlikely when you take all of the underaged Michigan residents out of the picture. Then the magic number to fund road repairs jumps to $10,000 of weed per person per year.

Instead of crossing her fingers and hoping that Michiganians REALLY like their new legal weed, Governor Whitmer instead proposed a 45 cent-per-gallon tax to help pay for those road repairs. Fellow politicians have condemned the idea of a gas tax, as Whitmer insists she only proposed it because there were no other alternatives on the table and time is of the essence with road conditions in such a dangerous condition.

Whether Michigan residents end up paying for their road repairs at the pump or at the dispensary seems to still be up in the air but, let’s be honest, one of these options is clearly more fun than the other, right?

Around the Circuit

NASCAR

Cole Custer got his third win of the 2019 NASCAR Xfinity Series season by passing Tyler Reddick on the final turn of the very last lap of the race at Pocono Raceway, finishing only .226 seconds ahead of Reddick. Chase Briscoe finished third.

Kyle Busch grabbed his fourth win of the Monster Energy NASCAR Cup Series on Sunday finishing 2.224 seconds ahead of second place finisher Brad Keselowski and third place Erik Jones. This is Busch’s 55th career victory, tying NASCAR Hall of Famer Rusty Wallace at ninth most all-time. The next win milestone for him to hit is the late, great Dale Earnhardt’s 76 wins.

The next NASCAR Xfinity Series race is the LTI Printing 250 at Michigan International Speedway on Saturday, June 8 at 1:30 p.m. Next up on the Monster Energy series is the Firekeepers Casino 400 at Michigan International Speedway on Sunday, June 9 at 2 p.m.