Proposed U.S,-Mexico trade deal won’t hurt Toyota

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Young: "We are not that far away."

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If President Donald Trump approves a proposed rewriting of the North American Free Trade Agreement in the US and Mexico, a Toyota CEO will say that it will not disrupt the car production of his company.

"We can make it work," said Robert Young, Toyota's North American main contractor, at Automotive News in September. "We feel comfortable that we can achieve the new requirements."

Young made his remarks when US trade representative Robert Lighthizer prepared to present the proposed US-Mexican trade agreement to Congress. Last week, Lighthizer said he would submit it, even though the US has not resolved its dispute with Canada on dairy rates.

Similarly, Lighthizer intends to negotiate exemptions for Canada and Mexico on US steel and aluminum tariffs after the agreement between the US and Mexico has been approved.

Informally called NAFTA 2.0, the deal with Mexico would require:

75 percent of a vehicle's content is produced in North America, an increase of 62.5 percent.

40 to 45 percent of a vehicle's content must be produced by employees who earn at least $ 16 per hour.

75 percent of the steel of a vehicle produced in North America.

Increased local production of powertrains.

These requirements seem feasible, Young said. North American factories produce 95 percent of the steel used in Toyota vehicles being built here. And North American suppliers account for 90 percent of Young's annual component purchases of $ 32 billion.

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Young also says that the $ 16 per hour requirement will be "easy for us to reach" on the basis of current regional labor costs.

However, Toyota is still in favor of a three-country trade region and Young warns that he should see what a deal between the US and Canada would look like.

NAFTA 2.0 would also require Toyota to boost regional powertrain production, which would require additional investment. Toyota can make the necessary changes in three to five years, which would meet the proposed deadline of the agreement.

"We are not that far today," Young said. "We feel comfortable that we can achieve the new requirements."

Young is optimistic because Toyota has applied its build-it-here, sell-it-here & # 39; strategy to its 400 North American suppliers and on itself.

The automaker has four assembly plants in the United States, one in Mexico and two in Canada, and it is building a new factory in Guanajuato, Mexico. That factory will launch the production of the Tacoma midsize pick-up next year.

The Guanajuato factory has become a kind of lightning rod. In January 2017, Trump had a sharp criticism of Toyota for building a new factory in Mexico. Another possible flash point is Toyota's manufacturing complex in Cambridge, Ontario, where it is spending $ 1.1 billion to produce the next-generation RAV4 crossover.

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