Howes: Tweeting Trump, trade tiffs challenge Toyota, too

Here are the problems Toyota Motor Corp. doesn’t have in North America:

It doesn’t have too much excess plant capacity, a costly surplus that is driving rival General Motors Co. to idle five plants as early as next year. It doesn’t have too many salaried workers, Toyota North America CEO Jim Lentz told the Detroit Economic Club Wednesday, just as GM prepares to lay off 6,000 white-collar employees as soon as next month.

And Japan’s No. 1 automaker doesn’t have too many car models in U.S. showrooms, even as the boss concedes there’s “a depression” in the U.S. car market only beginning to show signs of bottoming — not that Toyota has plans to emulate GM and Ford Motor Co. by dumping its Camry midsize and Corolla compact sedans.

It doesn't, he made clear. The exits of Detroit automakers from the American car market spell opportunity for the likes of Toyota, Honda Motor Co., Nissan Motor Co. and their South Korean rivals to grab shrinking market share that is, nonetheless, market share.

The problems Toyota does have, along with just about every other automaker operating in the United States: how to negotiate the Auto 2.0 challenges of mobility, autonomy and electrification and, second, the threats posed by President Donald Trump’s on-again, off-again tariffs on imported vehicles and parts.

The president's economic-policy-by-tweet has an entire industry on edge. GM and Ford say the tariffs are eating something like $1 billion each in unrealized profits. Germany's Big Three of BMW AG, Daimler AG and Volkswagen AG broke with their own government in Berlin and the European Union to come to Washington this week to lobby personally Team Trump.

Toyota's steel costs are up 40 percent, despite buying 90 percent of the stuff from U.S. producers. And it figures the president is more likely to exit the North American Free Trade Agreement and jettison its successor, the United States-Mexico-Canada Agreement, if a new Congress pushes Trump to renegotiate some of its terms and he refuses.

That would be a whole lot of not good for any automaker, foreign or domestic, building cars, trucks and SUVs in the United States with American employees. Already the so-called USMCA would establish the highest domestic-content requirements of any existing trade agreement, a politically popular move with the Trump base that nonetheless has real-world consequences for the industry and people who buy its products. 

“There’s not a single vehicle sold in the U.S. that is 100-percent U.S. made and U.S. sourced,” Lentz said Wednesday, predicting that full implementation of import tariffs would shave 2 million units in sales from the U.S. market, raise prices for dealers and consumers and likely slow a U.S. economy the automaker expects to otherwise be strong — “barring some crazy trade things.”

Boring times it's not. Even as Trump the "Tariff Man" is using 19th-century tactics to reshape an industry preparing to plunge deeply into 21st-century technology, automakers from Toyota and VW to GM and Ford are placing big bets on Auto 2.0. And they're pushing hard to raise cash so they can do even more.

Lentz's take: Toyota needs to keep selling cars, trucks and SUVs to generate cash and to retain its loyal customer base. And that includes developing mobility solutions that can get customers across the road as easily as they can get across town.

"We have to be agile enough to change as we go through," he said. "We have to take a hard look at what creates value for our customers and for the company."

In other words, make choices. Understand that vehicles, even whole business lines, that do not deliver strategic value and little profit should be discontinued and the cash directed elsewhere. And decide, like Toyota did when it euthanized its trendy Scion brand and applied its millennial learning back to the namesake brand.

It's not easy, executives say, but it's necessary. As Lentz addressed the Economic Club, GM CEO Mary Barra held the first of two days of conversations in Washington with lawmakers urging her to reconsider plans to idle four U.S. plants, lay off 6,000 salaried employees and affect the jobs of at least 3,300 hourly workers.

She deflected, saying today's auto industry "is transforming faster than I've ever seen in my 38-year career." Lentz basically said as much, too, because it's true.

daniel.howes@detroitnews.com

(313) 222-2106

Daniel Howes’ column runs Tuesdays, Thursdays and Fridays. Follow him on Twitter @DanielHowes_TDN, listen to his Saturday podcasts, or catch him 3 and 10 p.m. Thursdays on Michigan Radio’s “Stateside,” 91.7 FM.