German carmakers emerged from a three-hour meeting on Tuesday with US trade representatives and the president himself with smiles. “The US president has advised us to invest more in the US market. We are prepared to do exactly that," Volkswagen CEO Herbert Diess said in Washington, D.C.
The German carmakers are trying to avoid a 25 percent tariff on cars exported into the US. The investments they discussed with US Trade Representative Robert Lighthizer, Economics Secretary Wilbur Ross and Economic Advisor Larry Kudlow on Tuesday morning have been in the works for months – in response to Trump’s threats.
And VW especially had reason to smile because it was able to spin a months-old alliance with Ford as a new idea. US media is treating Volkswagen's proposal as one that was hatched just days ago to appease Trump and ward off the expensive tariffs.
Old dog, old tricks
In fact, Handelsblatt first reported on a possible cooperation in June and then again early last month, with VW looking for help with light trucks. Ford and its F150 pickup is the undisputed king while VW’s Amarok pickup is little known outside of the Hanover factory where it’s built. Ford wasn’t even the first choice – VW has been searching for a partner over the past year and only looked to Ford after an alliance with Fiat-Chrysler faltered.
Furthermore, VW's plan to build some vehicles at Ford plants is anything but certain. Ford Chairman Bill Ford said talks were in the early stages though he didn’t fault VW CEO Diess for blabbing about the plans. “He was sort of on the spot,” Ford was quoted as saying by Bloomberg. “I probably would have done the same thing if I was in his situation.”
For his part, Trump is trying to close a $30 billion gap in automotive trade with the European Union that is the largest chunk of the EU’s $65 billion trade surplus with the US. At the same time, he’s smarting from a General Motors announcement that it would shutter four US plants and fire thousands of workers. Trump was so incensed by GM’s plans that his administration is ending subsidies for electric cars to keep tax money away from GM.
The ambassador will wait outside
VW’s Diess as well as Daimler CEO Dieter Zetsche and BMW CFO Nicolas Peter had not expected to meet with Trump and, according to Handelsblatt information, German Ambassador Emily Haber was excluded from the trade talks at the White House’s request. But an invitation to meet with Trump arrived during that confab and Ambassador Haber was allowed to attend a separate 30-minute meeting with President Trump.
In addition to the Ford collaboration, VW said it might also cooperate with Microsoft on automotive software and build a second US plant, though no location was picked. VW currently produces two models in Chattanooga, Tennessee.
And BMW said it had already invested $9.3 billion in its plant in Spartanburg, South Carolina, and was planning an additional $600 million by 2021, leading to 1,000 new jobs. The Munich carmaker also said it’s considering a new US plant, this time for motors.
Both Diess and Zetsche were confident that auto tariffs could be averted. They did not give any concrete reason for their optimism.
Andrew Bulkeley is an editor in Berlin for Handelsblatt Global. Sven Afhüppe, Handelsblatt editor-in-chief, and Handelsblatt US correspondent Annett Meiritz contributed to this report. To contact the author: firstname.lastname@example.org