Business

Trump threatens to tax Toyota if it builds U.S.-bound cars in Mexico

AP, Kyodo

U.S. President-elect Donald Trump has trained his sights on Toyota in his latest effort to badger a company into building its products in the U.S. rather than Mexico.

Trump tweeted Thursday that if the Japanese automaker goes ahead with plans to build the compact Corolla in a new factory in Mexico instead of the U.S., it faces a “big border tax” when it ships the cars north.

The threat echoed those targeted at Ford Motor Co. and General Motors Co. Trump has repeatedly threatened Ford with a 35 percent tax on small cars made in Mexico, and this week he called out GM for importing cars from south of the border. He has made similar threats against companies outside the auto industry.

Nearly all automakers build small cars in Mexico to take advantage of lower wages. Consumers generally pay lower prices for small cars, making it difficult to cover higher labor costs in the U.S.

Trump’s tweet incorrectly stated the location of Toyota’s new Mexican plant — it’s Guanajuato, not Baja — but he’s correct in saying that Toyota has plans to build the Corolla in Mexico. The automaker announced the new factory in April of 2015, saying it will create 2,000 jobs.

Corolla production is to start in 2019 with a new model and would be moved from a factory in Canada. Toyota also would keep building Corollas at a U.S. factory in Blue Springs, Mississippi. The Cambridge, Ontario plant will build more higher-priced, midsize vehicles.

Toyota Motor Corp. didn’t directly respond to Trump’s taxthreat, but said Thursday in a statement that production and employment in the U.S. will not decrease due to the Guanajuato plant. Toyota said it has invested over $21.9 billion in its U.S. operations, including 10 manufacturing facilities, 1,500 dealerships and 136,000 employees.

Toyota President Akio Toyoda said Thursday in Tokyo that the automaker is not currently considering changes to its production plans. He said he would like to see the incoming Trump administration as “an opportunity” for the company.

“I don’t know yet exactly how, but, regardless of who becomes president, our business is about being good corporate citizens,” Toyoda said in response to a reporter’s question at a gathering of the Japan Automobile Manufacturers Association. “And by becoming good corporate citizens, we are facing the same goal of making America strong. And so we will continue to do our best.”

Honda President Takahiro Hachigo also said at the Tokyo gathering that his company has no planned production changes in Mexico.

Trump’s remark prompted reactions from other corners. Japanese officials said Friday that the country’s automakers are contributing to job creation in the United States.

“Japanese automakers are making significant contributions in terms of jobs in the United States. It is important that their efforts and results are accepted widely,” Economy, Trade and Industry Minister Hiroshige Seko told a news conference. “It is an issue of a private company but the government is set to support it.”

Chief Cabinet Secretary Yoshihide Suga also defended the role played by Japanese businesses in the world’s biggest economy, saying, “Toyota has been aiming to be a good corporate citizen for the United States.”

Following the Trump threat, Toyota shares dropped more than 3 percent at one point in Tokyo Friday.

Shares fell as much as 3.11 percent to ¥6,830 after the opening bell. Toyota ended Friday’s trading on the Tokyo Stock Exchange at ¥6,930, down 1.69 percent.

Other automakers also sagged, with Nissan declining 2.21 percent to ¥1,173 and Honda down 1.91 percent to ¥3,501 at the 3 p.m. close.

On Tuesday, Ford announced that it had scrapped plans to build a new $1.6 billion small-car factory in San Luis Potosi, Mexico. Instead, it will invest some of that money in a U.S. factory near Detroit that will build new electric and autonomous vehicles. But Ford still plans to shift production of the compact Focus to Mexico by adding it to an existing factory that builds midsize cars. In announcing the Michigan expansion, Ford CEO Mark Fields noted Trump’s promise to make the U.S. more competitive by lowering taxes and easing regulations.

Just hours before Ford’s announcement, Trump used Twitter to jump on GM, threatening the company with a border tax for making Cruze small cars in Mexico and shipping them to the U.S.

GM responded by saying the vast majority of Cruzes are made at a plant in Ohio. The company said it sold a small number of Mexican-made sedans and about 4,500 hatchback Cruzes in the U.S. last year. In total, GM sold about 189,000 Cruzes in the U.S. in 2016.

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