Trump’s Trade War With China Pierces the Heart of Michigan
S E E D E D C O N T E N T
China’s flag flies high above Henniges Automotive, alongside those of Germany, Mexico, Canada and other nations, reflecting the global nature of Michigan’s auto industry and, increasingly, its reliance on Beijing.
Henniges, which produces sealing products for cars, was bought in 2015 by the Aviation Industry Corporation of China, a state-owned company that has snapped up other investments in the Detroit area, including the automotive supplier Nexteer, which sits just across Interstate 75 from Henniges. Over the past several years, Beijing has steadily pumped billions of dollars’ worth of investment into Michigan, buying crumbling factories, building new ones and supporting more than 10,000 jobs in the state.
reflecting the global nature of the state’s auto industry.
Brittany Greeson for The New York Times
But where Michigan sees an economic partner, President Trump sees an “economic enemy” — one intent on overtaking America’s competitive edge by stealing technology, trade secrets and jobs from domestic companies. As Mr. Trump tries to punish China with tariffs and other restrictions, Michigan is caught in the cross hairs, with its ability to remain competitive and develop emerging technologies like autonomous vehicles, robotics and artificial intelligence highly dependent on ties to international markets, including China.
“The automotive industry is a global industry,” said Michael O’Kronley, a top executive at A123 Systems, an electric vehicle battery maker purchased out of bankruptcy by the Chinese company Wanxiang in 2013. “If you’re going to supply products into that, you need to be global.”
General Motors now sells many more cars in China than it does in the United States, and the largest exporter of cars from the United States by value is not an American brand, but BMW. By some calculations, the car with the highest proportion of United States and Canadian-made content is the Honda Odyssey — and even that includes roughly a quarter of foreign-made parts. Companies — and their workers — say they recognize there are certain risks from sharing their technological secrets with Chinese competitors, but they say it is no longer a choice whether Michigan, the automotive capital of North America, should engage with China, the world’s largest auto market.
“You can’t separate the two,” Jerry Xu, former president of the Detroit Chinese Business Association, said of China and Michigan. “You’re going to kill the industry if you try.”
The inevitability of foreign ties has even filtered down to the industry’s rank-and-file workers, who — after witnessing years of layoffs and plant closings — say it matters less who owns their company than that it continues to survive.
Brittany Greeson for The New York Times
“There’s Japanese owners, there’s Chinese owners,” said Roy Pierce, an autoworker who, for more than 20 years, has helped make interiors for vehicles like the Jeep Wrangler and Ford F-150 at a facility in Port Huron, Mich., near the Canadian border. “As long as they’re making it here, I can’t complain. It’s still paying our wages.”
Michigan is one of the industry’s global hubs, home to more than three-quarters of all automotive research and development that occurs in North America. The Detroit area boasts two major testing sites for autonomous vehicles, sprawling compounds of interstates, guardrails, and mock pedestrians and bicyclists that companies and researchers use to test their technology. At the University of Michigan, a driverless vehicle shuttles students around the campus.
Global competition is stiff, however. China’s progress on both autonomous and new energy vehicles is booming, in part thanks to generous subsidies and government funding, restrictions on gasoline cars, and regulations that require Chinese automakers to produce a certain number of low-emission cars per year. Last year, China accounted for more than half of the electric vehicles sold globally, according to the International Energy Agency. Although many in Michigan say China is on equal footing or still behind the United States in technological development, they do not expect that edge to last long.
To stay competitive, Michigan has spent much of the past decade trying to woo foreign investment from Beijing alongside longstanding investors from Japan, Europe and South Korea. In early May, as the Trump administration prepared to roll out tariffs and investment restrictions against China, Rick Snyder, Michigan’s Republican governor, welcomed more than 150 potential Chinese investors to tour Detroit, Ann Arbor and Grand Rapids.
While Washington was projecting a hostile climate, Mr. Snyder told the delegation that Michigan was “open for business.” In each of the past seven years, Mr. Snyder has traveled to China to visit entrepreneurs and solicit investment.
Brittany Greeson for The New York Times
The overtures have paid off. Oakland County, a Detroit suburb home to many auto suppliers, ranks third nationally among American counties in terms of the number of jobs that depend on Chinese investment, according to tracking by MacroPolo, a Chicago-based think tank. Chinese firms have also flooded into Wayne County, which includes downtown Detroit, to buy up defunct office buildings and vacant factory space.
Larry Williams, the president of Henniges, said a cash infusion from the Aviation Industry Corporation of China allowed his company to expand abroad and add jobs at its American facilities, including its Michigan headquarters. That investment was a key to the company’s remaining competitive globally, he said, since major automakers like Ford, Volkswagen and Daimler now standardize their products internationally and will no longer do business with suppliers that can compete in only one market.
“I don’t think they’re coming here to steal technology or steal intellectual property,” Mr. Williams said of the Chinese. “I think they’re coming here to learn, but not to take it back to China and forget about North America. They want to create global companies.”
The acquisition by AVIC, a state-owned company that supplies planes and weapons to the Chinese military, was reviewed by the interagency Committee on Foreign Investment in the United States, which vets foreign deals for national security risks. Mr. Williams said he feared that, in today’s climate of rising suspicions toward China, the deal would be subjected to even more intense scrutiny.
The Trump administration has taken a far more pessimistic view of Chinese investment, particularly in technology and manufacturing, and is supporting legislation that would make it harder for foreign companies to invest in American companies like Henniges. Peter Navarro, a top trade adviser to Mr. Trump, has argued that China’s trade surplus with the United States has given it vast financial resources to buy up American companies, a process he describes as “conquest by purchase.” Other White House officials have said that some loss in Chinese investment, especially in sensitive technologies, is nothing to be dismayed about.
“There are a lot of areas where we do not want Chinese investment: militarily sensitive things, some areas of high tech,” Wilbur L. Ross Jr., the commerce secretary, said. “There are lots of areas where we do welcome it, and that’s the prerogative of any country.”
Mr. Trump’s trade policies are beginning to chill Chinese investment. To pressure Beijing to change its trade practices, the president has put tariffs on tens of billions of dollars’ worth of Chinese products and threatened hundreds of billions of dollars more, especially goods that feed into the “Made in China 2025” plan to cultivate high-tech industries. He has also proposed expanding government reviews of foreign investment .
Those actions, combined with tighter restrictions by the Chinese government on money flowing outward, are stemming Chinese investment in the United States. It plummeted more than 90 percent between the first half of 2017 and the first half of 2018, to its lowest level in seven years, according to tracking by Rhodium Group .
He Xian, a lawyer for the firm Butzel Long who helps arrange Chinese investments in Michigan, said the tariffs are actually encouraging some Chinese companies to move their operations to the United States, especially if they are seeking to supply to the American market. But many other Chinese clients that depend on international ties are choosing to invest elsewhere because of tariffs and other barriers, as well as growing antagonism toward China more generally.
One of Butzel Long’s clients, a Chinese entrepreneur who was planning to set up a $10 million research and development facility in Michigan, recently chose to go to Germany instead because of concerns over new regulations on licensing and technology transfer. Another Chinese company Mr. Xian worked with had been planning to import 5,000 tons of beef a year from Michigan — a win for the Trump administration, which reached a deal last year to finally open the Chinese market to American beef. But in recent months, the Chinese company decided to give up on the deal, seeing the threat of a 25 percent Chinese tariff on American beef as too great a risk.
“We need predictable, stable policies,” Mr. Xian said. "Without certainty, nothing can happen.”
The auto industry is facing other pressures from the president’s trade agenda. His administration is investigating the national security threat posed by imported autos and auto parts, which could result in sweeping tariffs for the industry . Steel and aluminum tariffs levied by the administration earlier this year are raising material costs for car companies, while the president’s threats to withdraw from the North American Free Trade Agreement would put the industry’s most valuable export markets at risk.
The Trump administration has pointed to a rising share of imports in the American automobile market and falling numbers of manufacturing jobs as evidence that the industry needs help — though many economists attribute these trends in large part to the irreversible processes of globalization and automation. The administration also sees the auto market as a key to reducing what it sees as an unsustainable trade deficit.
Jeffrey Sauger/Bloomberg
Mr. Ross said at an investment forum in June that the trade deficit “really has two sets of origins.”
“One is a geographic one, that’s called China,” he said. “The other is a product one, that’s called automotive. If we don’t solve those two, we will not be able to do much to fix the trade deficit.”
But to many Michigan firms that have benefited from ties to China, the strategy appears counterproductive to America’s long-term growth.
As members of the United Automobile Workers, the industry’s main labor union, gathered for their constitutional convention in downtown Detroit, they acknowledged a wariness of foreign takeovers, but said investment from abroad had benefited them and their colleagues in the past.
Dominic Miccichi, a 24-year-old autoworker from Tiffin, Ohio, said that a Chinese company, Ningbo Jifeng Auto Parts, was bidding to take over his plant, Toledo Molding and Die, by buying its current German owner, Grammer.
Mr. Miccichi admitted that the idea of American companies being bought up by the Chinese “puts a bad taste in your mouth,” but said that the deal actually might benefit his fellow workers by bringing the plant more money and more opportunities for expansion.
“We lose a lot of business because we’re not global,” he said of his factory near Toledo. “We used to make the interior of the Wrangler. That’s gone.”
“We’re anxious, but it could be a good thing,” he said of the deal.
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The difference between a "negative attitude" and a "positive opinion"... for those who diligently assimilated the vocabulary ...
It's quite amazing how countries/companies are linked together in the auto industry. The tariffs could result in a lot of pain for some companies/industries.
I was watching an interview with lobster fisherman in Maine and how the tariffs may well devastate their industry with China being a major buyer of their lobster.
On the plus side - cheap lobster for me! Mmmmmm
Only if there is a industry left after the trade wars, Hal.
Don't care! We have fresh lobster at the Calais fishermen's wharf. Only about $10-12 / lb, so we do it fairly often.
... a national leader can apparently be unaware of such links...
And that as well.
This is a topic a lot of people at decision making levels really do not understand. This statement is true across quite a few administrations which allowed policies which have brought us to where we are today.
Now all of a sudden we want to flip a light switch to "fix" 30+ years of poor decision making.
The automotive industry is arguably the most internationally link industry.
Just look at Ford Motor Company. Last year they axed all "car" production in the US and all of North America, except for the Mustang.
The remaining other car is the Focus. The remaining bread and butter Focus models will resume production in China in about 16 months. The sporty RS and ST models will come from Germany.
Look for Buick to move more production there too.
The production moves mentioned are only in addition to Ford and GM production already in China.
These are only a couple of many other examples. So now, we will pay additional tariffs on American branded products now imported back to our shores.
Maybe it might be too early to mention discussions of Mitsubishi buying Fiat-Chrysler. Hmmm? wonder what the implications are there?
The aftermarket industry supporting motorsports is another topic, additional twists. I'll be busy for a bit, but will follow up on that.
Buick is completely international. There are American products and Chinese products, produced in America, China and Korea.
My Encore was created for the Chinese market and adapted more or less as an after-thought for the American market... where it has been an unexpected hit. Oh, and... it's built in Korea, and sold in Europe under the Opel label. To make it simpler, Opel is not GM any more, having been sold to Peugeot.
The Envision is a Chinese model, built and sold in China and sold in America.
The Enclave is an American model, built and sold in America, and sold in China.
Altogether, Buick sells several times as many cars in China as in America.
That is true, and look for more to shift to China just as Ford is doing.
Don't hold you breath about much out of the Daewoo plant. The re-badging has not done much to fix the inherent problems there.
I've not heard anything about Mitsubishi buying Fiat-Chrysler. There were rumors in 2014/15 of the Chinese buying Fiat though.
Doesn't Nissan own a controlling interest in Mitsubishi?
There is some chat going on about that, so maybe too early to talk about. This would involve Renault as well.
I don't know how the Italian government would react to a Chinese take over of Fiat.
I think there is something in print. I'll have to track it down.
Correction it is Hyundai.
Mitsubishi is a different topic related to remapping the VCT (variable cam timing) relative to turbos with at or near 1:1 intake/exhaust pressure ratios.
Hyundai reportedly eyeing a takeover of FCA
Hyundai's CEO wants to launch the bid before Sergio Marchionne retires
The CEO of Hyundai Motor Group plans to launch a takeover bid for Fiat Chrysler ahead of the planned retirement of FCA Chief Executive Sergio Marchionne next spring, Asia Times reports , citing unnamed sources close the situation. CEO Chung Mong-koo will wait for an expected decline in the Italian-American automaker's shares to make his move.
Hyundai isn't commenting on the rumors , unsurprisingly, but would presumably stand to benefit by gaining Chrysler 's dealer network and the lucrative Jeep brand and probably Ram , too. An FCA spokeswoman in Auburn Hills told Autoblog the company had no comment.
But like any story about a possible takeover, this one gets complicated with inside players — and President Trump's posturing on international trade issues.
FCA has been the subject of takeover interest before, including by Hyundai , but Marchionne has denied a merger was likely, instead saying his company was in talks with the Korean automaker about a technical partnership. In 2015, Marchionne lobbied General Motors hard , but unsuccessfully, for a tie-up; he was also spurned by Volkswagen . Marchionne had repeatedly stressed the need for car companies to merge to decrease overcapacity and better afford the massive investments needed for things like autonomous and electric vehicles .
In the case of Hyundai's reported interest, there is a cast of characters. One is Paul Singer, principal of the hedge fund Elliott Management, an activist shareholder with a $1 billion stake in Hyundai and a major owner of equities in Fiat 's home turf of Italy. Then there is FCA Chairman John Elkann , who reportedly disagrees with Marchionne on a successor as CEO of Fiat Chrysler but has little interest in running the company himself and would prefer a merger.
Compounding things is what the Trump administration would think of a further blending of Fiat Chrysler's international DNA, though a deal with a Korean automaker is thought to be more palatable to the president and members of Congress than by a Chinese conglomerate like Great Wall Motor, which has confirmed its interest in taking over all or parts of FCA.
The full Asia Times piece is here .
Yup, now I remember some of this. Hyundai has expressed an interest before. It would be interesting to see this happen or at least move it forward in the process.
China was mentioned but currently they own Volvo and have just completed building a plant in SC....
LOL, it gets more complicated by the minute...
It sure does. There are a lot of international relationships in the automotive industry.
Tata Motors (India) owne's Jaguar and Land Rover...The most American car by percent of parts is a Honda and or Toyota, Japanese companies...LOL
Reminds me, have you heard of Mahindra's '48 "Willys Jeep" ish offering?
I wonder how good or use able it is?
The Mahindra Roxor Is A Tiny Offroad Jeep That You Can Totally Buy In America
Unlike many other side-by-sides , the Roxor will feature a very CJ-7-ish steel body mounted on a steel frame. And like an old-school Willys Jeep, bolted to the frame will be two sets of leaf springs holding up two solid axles (3.73 ratio; lockers will be available later, according to company reps).
The powertrain will be the ultimate off-roader’s dream: a turbo-diesel (a four-cylinder) mounted to a five-speed manual (an automatic option will also be available) mounted to a low-range transfer case. Admittedly, that 2.5-liter diesel that has to carry around 3,035 pounds of curb weight isn’t the strongest at 62 HP at 3,200 RPM and 144 lb-ft at 1,400 rpm.
Mahindra has quite a history of building Jeep-like vehicles, with their very first offering being the forefather of the current Thar (on which the Roxor is based); that first car was essentially a Willys CJ-2A Jeep shipped to India as a knock-down kit and assembled under license back in the late 1940s. It’s these “grandfathered” licenses that allow the company to build such Jeep-like vehicles.
And my god, is the Roxor Jeep-like. The rounded fenders are pure CJ-7, as is the door opening with a filleted corner and a sharp 90-degree cut rearward to the top of the rear tub. The shape of the hood, the hood latches, the outline of the grille—it’s all extremely CJ-7-ish. The rear is a bit different, though, with different lights and a fuel filler on the side instead of under the taillamp.
The wheelbase is about three inches longer than a CJ-7, overall width is narrower, height is about eight inches taller, but length is almost exactly the same.
According to chairman Anand Mahindra , the new Roxor will come with an absurd 900 color options.
Towing capacity is about 3,490 pounds, and rear payload capacity is only 349 pounds. Maximum speed is limited to 45 MPH—that’s a similar top speed to that of an old Willys CJ-2A. Fuel economy, Mahindra claims, is somewhere around 32 MPG based on company testing.
Starting prices for the two trim levels, according to company representatives, will range from $15,549 to $18,999. I can’t wait to get my hands on one.
This post has been updated.
I've read a bit about this some time ago (couple of years)...I had no idea that it was a ''go''...Should be interesting. I loved the Willy's when they were actually made here in the U.S. I just dated myself...LOL
LOL.
When we were young a friend bought an "Army Surplus" '48 Willys and we put a 283 Chevy in it. It was built up pretty well. It could fly up any stinking hill and get airborne on top.
My Grandfather had a '59 Willys pickup with the flat head 6. That was a rugged p/u.
Ther's a pretty good site for Mahindra North America ... but no prices or dealerships...
Try here:
There is a menu that can open on the left of the page.
That works. The configurator takes a century to load, but it's pretty cool once it's up. A stripper costs $ 14 999. An "all the options" model costs $ 19 286.94. That's not too expensive, if it's a decent off-road toy.
There's a dealer in Phoenix. There's a huge market for off-road toys in te Southwest, so....
I would look into a flash tune to pick up the power a little bit too. Something moderate.
Nissan just took over Mitsu by buying 34% o fthe company in 2016.
Some believe Li Shufu , the Chairman of Geely was behind that and he expressed interest in Fiat Chrysler as well.
His grand vision is to merge all of the existing manufacturers until there are only three conglomerates left standing.
and he will be in charge of at least one of them.
Geely owns Volvo and has purchased a stake in Volvo Trucks. So they are spreading their wings so to speak.
On the subject of trade wars....
Wal-Mart employs 2.1 million people in the USA alone. There will be a LOT of lost jobs from Wal-Mart ALONE if we enter a trade war with China.
As mentioned earlier, some thoughts on racing and performance automotive aftermarket products.
This is an area where the Chinese manufacturers have shot themselves in the foot.
Terrible quality control issues exist. So much so, many, including me, refuse to get involved in any engine projects where an owner insists on using any pure Chinese parts.
There are just to many expensive bad experiences. This is an area where the higher end customers also refuse pure Chinese parts. Again, bad, expensive experiences.
Now, I say "pure Chinese" parts are shunned because there are some reputable US and Aus outfits who rely on raw Chinese billets and forgings in a lot of situations. All machine work is done here in the States or Aus. Outfits like Scat do that and their cranks and rods are good pieces. I have used their cranks in 1600hp small block Fords. I wouldn't use their rods much past 800hp or if the application had to rev much past 8k rpm.
For valve springs and valves, in a race engine or serious performance engine, even that compromise would not be acceptable. It is in the category of Just Say No.
For the foreseeable future, there is still heavy reliance on domestic production here, Aus and parts of Europe. But these tariffs make it that much more difficult for those customers who are already paying premium prices.