The chief executive officer of Fiat Chrysler Automobiles NV, Sergio Marchionne is of the view that the Italian automaker’s business in North America could get impacted by the critical stance toward free trade that President-elect Donald Trump had taken during his election campaign trail and now if he follows that up with action.
Marchionne told Bloomberg Television at an Alfa Romeo plant in Cassino, Italy that Trump’s election “certainly is a game changer, mainly because I think that there are a number of conditions in the U.S. which are not yet spelled out.”
Since the North American Free Trade Agreement’s impacts on Fiat’s operations in the U.S., Mexico and Canada, hence the statements Trump has made about trade are “a big issue” for the company, he said.
Having described NAFTA as being the worst deal ever that the United States could have made and blaming the deal for the U.S. job losses, Trump has frequently slammed the deals during his campaign raising concerns about the future of the deal.
The President-elect has already made public his intentions of imposing a 35 percent tariff on products made by companies that move their production from the U.S. to other countries while referring to Ford Motor Co. and singing out the company for making cars in Mexico and moving an existing unit from the U.S. to Mexico. Car makers General Motors Co., Ford and and Fiat are among nine global automakers who have announced more than $24 billion in Mexican investments since 2010.
According to Kevin Tynan, Bloomberg Industry senior analyst, in the first ten months this year, Fiat assembled about 17 percent of all the vehicles it made in the North American region in Mexico and this region is the one that generates the lion’s share of its profits in terms of global sales. Almost all of those cars were sold in the U.S. and Canada.
“The company would incur hefty costs if the Trump administration is able to enact a 35 percent levy on vehicles and parts imported into the U.S.,” Tynan said.
Depending on the way Trump manages NAFTA and whether he supports the protectionist views he expressed, Marchionne warned in June that a Trump victory could impact the carmaker’s production options in North America. The Fiat CEO said he will work with the new administration but he hasn’t spoken with Trump yet.
It is not only the trade prospects of the carmaker that us being impacted by the change in U.S. leadership. After Trump chose a prominent climate change skeptic to lead his Environmental Protection Agency transition team, there was jump in the share price of Fiat the share prices of Fiat three days after the selection even as it gained 14 percent since the Nov. 8 vote. The appointment led to speculations that the makers of conventional engines would be benefited as the new administration may loosen fuel-economy rules allowing more conventional engines to hit the roads. Marchionne said that in addition, gains by the U.S. dollar since the election are positive for Fiat.
(Adapted from Bloomberg)