More car models may be withdrawn from US

Ford announced that it was not worth investing more money in a vehicle that would sell in low volumes in the US.
Ford announced that it was not worth investing more money in a vehicle that would sell in low volumes in the US. PHOTO: AFP

Following Ford, other carmakers may also abort plans to import cars into the United States if the Trump administration imposes additional tariffs

DETROIT • It could be the end of the road for some cars that are exported to the United States.

And Ford is unlikely to be the last to say "forget it" to a vehicle that does not make financial sense for the American market anymore, thanks to US President Donald Trump's trade wars.

The second-largest American carmaker has pulled the plug on plans to import a new small crossover from China called Focus Active.

Mr Trump was the culprit behind the decision.

His administration started imposing an additional 25 per cent tariff on vehicles imported from the country he portrayed in July as America's biggest trading foe.

The move will barely make a difference for Ford's sales or profits, as the company was expecting to sell fewer than 50,000 Focus Actives a year.

But the decision looms larger as a potential first of several cars to be aborted as a result of duties that render them unaffordable for consumers or unprofitable for manufacturers.

A major risk looming for the industry lies in the investigation that the US Commerce Department started in May of the national security peril posed by imported cars and components.

The administration is said to have been considering tariffs of as much as 25 per cent and could do so by invoking the same Section 232 trade law used to justify steel and aluminium levies earlier this year.

Concern that those levies would come to pass eased in July, when European Commission president Jean-Claude Juncker reached an agreement with Mr Trump that both sides would refrain from new tariffs as long as they were negotiating a trade accord.

But Mr Trump's remarks in a recent interview with Bloomberg News cast doubt on the longevity of that deal.

"The Trump administration seems very intent on imposing the 232 tariffs," said Ms Kristin Dzic-zek, vice-president of industry, labour and economics at the Centre for Automotive Research.

"That would mean that a lot of models would be withdrawn from the US market."

Mr Trump has also threatened to hit Canada with auto tariffs.

Both Toyota and General Motors source some of their best-selling sport utility vehicle models, the RAV4 and Chevrolet Equinox, from Canadian plants.

BMW and Daimler import tens of thousands of 3-series sedans, GLC crossovers and other models from Germany every year.

While big tariffs would be hugely disruptive for these models, the ones with greater risk of getting dropped altogether from the market are marginal sellers like Ford expected the Focus Active would be.

General Motors president Dan Ammann said on Aug 3 that the only way the China-built Buick Envision SUV would be available in the US market was if it got an exemption from the levies.

Ford announced that it was not worth investing more money in a vehicle that would sell in low volumes in the US, just two days after Moody's Investors Service lowered its credit rating to one step removed from junk status.

Mr Kumar Galhotra, Ford's president of North American operations, declined to say whether the move was a reflection of doubt that cooler heads would prevail in the US-China trade war.

"Given the tariffs, obviously our costs would be substantially higher," he said in a conference call with reporters.

"Our resources could be better deployed."

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A version of this article appeared in the print edition of The Straits Times on September 08, 2018, with the headline 'More car models may be withdrawn from US'. Print Edition | Subscribe