Fiat Chrysler Threatens to Close Mexico Plants if Trump Boosts Tariffs

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The CEO of Fiat Chrysler Automobiles, Sergio Marchionne, recently said his company zooms in on the possibility to close its Mexico plants if Trump administration decides to raise tariffs on Mexico-made cars. Marchionne, who heads the world’s seventh-largest automaker, added that the entire automotive industry has been living under a cloud of uncertainty after Donald Trump’s win.

On the campaign trail, the New York City billionaire pledged to hike tariffs on Mexican goods by as much as 35 percent to prevent U.S. jobs from fleeing the country.

Shutting Down Mexico Plants a Likely Scenario

On Monday, Marchionne told a large crowd of reporters in Detroit that if the new administration carries out its plan it would be “uneconomical” to produce the cars in Mexico. So, production is very likely to move elsewhere.

It is quite possible,

Marchionne said about the scenario.

He explained that repurposing the Mexican plants would be very costly. When one reported asked him whether Fiat would accept to stay if the Mexican government offered some incentives, the Italian businessman replied it was “incredibly imprudent” to commit to “that country”.

Marchionne believes the U.S. trade war against Mexico would have a much larger impact on the latter country than on the former. Yet, if the U.S. goes as far as to tax all imports the “implications” are much worse.

Experts believe the trade war can cost companies and Mexico hundreds of million or billion dollars by 2022.

Fiat Chrysler’s comments emerged one day after Trump praised the Italian car maker and Ford for their new investments in the U.S. During the presidential race, the real estate tycoon turned the revamping of the US auto production into a center piece of his campaign. The commitment helped him win the hearts and votes of thousands of autoworkers.

His campaign yielded some results as Ford announced last week that it would no longer build a $1.6 billion factory in Mexico. Instead the Dearborn, MI-based automaker promised to invest $700 million in a U.S. factory.

Ford Creates 2,000 U.S. Jobs

Over the weekend, Fiat Chrysler said it would invest $1 billion in Michigan and Ohio factories. The investment which will spur SUV and pickup production will create 2,000 new jobs. Trump took to Twitter to thank both companies for ditching Mexico for the U.S.

Marchionne said he hadn’t discussed with the president elect or his team. The plan had been reportedly in the works for quite some time. Fiat whose best-selling models include Chrysler, Alfa Romeo, Fiat, Jeep, and Dodge manufactures about 17 percent of its cars in Mexican plants.

Moreover, Marchionne said his company and other car makers find it increasingly hard to thrive in the current political context. Trump had also pledged to undo the North American Free Trade Agreement (Nafta) between the U.S., Canada, and Mexico.

The Fiat boss also said he didn’t know whether Trump’s promises were some kind of new political language. He added the company would adjust to the language too.

General Motors CEO Mary Barra said the Detroit-based company would not change relocation plans due to the president-elect. Barra added the decisions had been made from two to four years ago. GM disclosed a new model of crossover SUV – the GMC Terrain – would be built in Mexico.
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