Auto industry, UAW await details on NAFTA rewrite

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UAW President Gary Jones: "Many details have yet to be reviewed and resolved before a final judgment is made on this agreement." Photo credit: REUTERS / Rebecca Cook

WASHINGTON – US car manufacturers, analysts and UAW said that the revised NAFTA deal by President Donald Trump could have a positive impact on the US auto industry, but details of the agreement still needed to be considered.

The agreement between the US and Mexico-Canada "will transform America into a production power plant and allow us to reclaim a supply chain that is offshored to the world," Trump said in comments from White House Rose Garden on Monday.

NAFTA ensured that the American car industry lost about a quarter of all jobs. That is why so many union members voted for him, he said. Experts say that automation and other outside factors also played a role in reducing the level of employment in the sector.

Under the deal previously concluded with Mexico, light vehicles will need 75 of their content to find their origin in North America to qualify for duty free treatment when imported from Canada or Mexico. The agreement also requires greater use of domestic steel and other materials and that 40 to 45 percent of the content comes from regions with labor costs of at least $ 16 per hour.

The goal of the Trump administration is to make it easier for car manufacturers and suppliers to maintain or expand domestic factories by making it more expensive to produce outside the US.

"With this agreement, we are closing all those terrible loopholes," which will lead to more high-quality jobs in the United States, Trump said.

Foreign car manufacturers who ship parts of their home base to factories in Mexico could, according to analysts, take the greatest challenge to keep to the rules.

Automakers had mixed initial reaction to news of the deal, but said they were busy reviewing details to understand its impact. The industry is unified in contrast to Trumps threats of wide car rates, but less on changes to NAFTA car rules.

Automakers representing foreign brands in the United States, such as Honda and Kia, expressed lukewarm support for the proposed deal and noted that the costs and complexity of complying with the new car legislation will pose serious challenges for US car manufacturers.

They said they were reviewing the text of the agreement.

Ford satisfied

Domestic car manufacturers had a more favorable return.

"Ford is very encouraged by today's announcement and we applaud all three governments for working together to achieve free and fair trade in a strong regional agreement. We are ready to be a collaborative partner to ensure this agreement is ratified in all three markets because it will support an integrated, globally competitive automotive industry in North America, "said Joe Hinrichs, Ford's president of global operations.

The American Automotive Policy Council, which represents Ford Ford Motors and Fiat Chrysler Automobiles, called the deal "workable" for the industry.

Meanwhile, the Alliance of Automobile Manufacturers, whose members include foreign and domestic car companies, said that maintaining a trilateral agreement with Mexico and Canada is "encouraging."

The highest priority for Automakers was to maintain a tightly integrated production system that benefited from the efficiency in each country.

In some cases, meeting the content requirements could force car manufacturers to offer stripped models with less content or more content could become optional with higher markups, said Ivan Drury, senior manager of industry analysis at Edmunds.

Just wait

UAW President Gary Jones said in a statement that the "real test of a new NAFTA agreement" will ultimately be whether it means higher wages and benefits for UAW members and production workers.

"We believe that the idea and concept of the USMCA could offer the potential to provide a necessary relief for working families in America," the statement said.

"Many details still need to be reviewed and resolved before a final judgment is made on this agreement … We need to be sure that Mexico will repair weak labor laws and enforce new employee protection. [U.S. trade representative] and Congress will do to ensure that the words in the agreement are implemented. We need to review and resolve the details of the agreement when they are available to ensure that this agreement really puts an end to NAFTA's legacy of factories with shutters and low wages. "

Michelle Krebs, executive analyst at Autotrader, said in a statement: "On more than 1000 pages in length, we will not fully understand the overall impact of the trade agreement negotiated during the weekend without further study and until later The fact that there is a direct agreement at all, one that has a long-term horizon of 16 years and will allow car manufacturers and their suppliers to do long-term planning, is a plus. "