Fiat-Chrysler CEO Sergio Marchionne: It wasn’t Trump. (Source: AP Photo/Carlos Osorio)
At the Detroit auto show in early January, Sergio Marchionne, the CEO of Fiat Chrysler (FCAU), said he would love to credit Donald Trump for his company’s decision to make a big new investment in US factories. But the planning had been going on since well before Election Day last November. “I wish I could give [Trump] credit for this,” Marchionne told a group of reporters, “but the thinking was in place beforehand.”
NBC News recently reported that US automakers and other manufacturing companies are “recycling” old news about US job creation and investment, to earn Trump’s approval and get him off their case. Trump blasted NBC, in the usual fashion:
But there’s convincing evidence, both explicit and inferred, that CEOs are, in fact, ginning up Potemkin job announcements that amount to far less than they seem. No one has been as blunt as the typically outspoken Marchionne, an Italian who has said he’ll step down from the CEO job at Fiat Chrysler within two years. For starters, however, it defies belief that big companies could make billion-dollar investment decisions that need sign-offs from boards of directors in the hasty Twitter time frame Trump tends to demand.
At the Detroit auto show, senior auto executives—from both foreign and American companies—were cagey on the extent to which they’re changing operations simply to appease the incoming president. If there’s a pattern, it’s that they all insist they’re not distorting their operational plans in ways that would impede profitability, a message it’s important to convey to shareholders and Wall Street analysts.
Balancing business interests with Trump’s interests
Ford (F) Executive Chairman Bill Ford, for instance, told Yahoo Finance in Detroit, “[Trump] understands our business now better than perhaps he did when he was first a candidate. And we understand what he wants to get done.” The message to shareholders is that Ford is asserting its business interests with the new president, while also negotiating so Trump can get the PR victories he’s looking for.
For Ford, it worked. At virtually the same time the company was announcing plans to build a new truck in the United States—where it builds most of the trucks it sells here–Trump tweeted his approval of news that Ford was killing plans to open a third factory in Mexico. That has become the prevailing pattern: Companies make some public concession on jobs, and Trump blesses the news with a tweet. It has now played out that way for Ford, General Motors (GM), Fiat Chrysler and Carrier (UTX).
Defense contractors Boeing (BA) and Lockheed Martin (LMT) earned Trump tweetlove not so much for job announcements, but by publicly pledging to control costs on big programs such as the next version of Air Force One and the F-35 fighter jet.
Part of the problem US manufacturers face is Trump gives them no credit for hiring or investment in the United States that took part before his election in November. Yet some of those companies have invested and hired a lot. GM, for instance, has staffed up by more than 12,000 American workers during the last two years. Ford doesn’t have a precise number, but CEO Mark Fields says the company has hired “thousands” of Americans during the last few years. Yet for Trump, the clock reset on Nov. 9, and he only credit new jobs announced since then. And he berates companies until they generate positive news he can take credit for. That puts them in the position of reframing hiring plans already in place—even if some haven’t been publicized yet–as new moves triggered by Trump’s promise of more business-friendly policies.
Given the ongoing boom in auto sales, along with the need to invest in new technologies such as electric and self-driving cars, it seems entirely likely automakers would continue to hire at rates similar to what they’ve already been doing during the first few years of the Trump administration. But that wouldn’t give Trump anything compelling to brag about. So the automakers have shrewdly found ways to alter what is already a good story on hiring in order to let Trump take credit for things that probably would happen anyway.
The wink-and-nod arrangement seems to suit both sides, for the time being. But Trump risks fostering a Potemkin economy in which manufacturers make splashy announcements about new jobs, but overall employment flatlines or declines anyway, due to robotics, other types of new technology and intense efforts to cut labor costs to keep prices down. After Carrier acquiesced to Trump and canceled plans to move 1,100 jobs from Indiana to Mexico, the CEO of the company’s parent firm, United Technologies, warned that keeping those jobs in America would create incentives to invest in more labor-saving automation in order to remain competitive. If Trump racks up dozens of “wins” on Twitter, but it doesn’t move the needle on jobs, his efforts will seem phony indeed. For now, he’d probably be wise to tout good things that are happening, whether employers credit him or not.
