Trump threatens border tax on GM

President-elect Donald Trump has threatened to impose a "big border tax" on General Motors Co for making some of its Chevrolet Cruze compact cars in Mexico, an arrangement the largest American automaker defended as part of its strategy to serve global customers, not sell them in the United States.

Donald Trump. Photo: Reuters
Donald Trump. Photo: Reuters

Trump's comments on Tuesday marked his latest broadside aimed at an American company over jobs, imports and costs before he takes office on January 20, signaling an uncommon degree of intervention for an incoming US president into corporate affairs.

"General Motors is sending Mexican made model of Chevy Cruze to US car dealers-tax free across border. Make in USA. or pay big border tax!" Trump said in a post on Twitter.

Trump did not provide further details but previously vowed to hit companies that shift production from America to other countries with a 35% tax on their exports into the US. He also has denounced the North American Free Trade Agreement between the US, Mexico and Canada.

Trump's tweet came hours before GM's rival Ford Motor Co announced it would cancel a planned $US1.6 billion ($NZ2.3 billion) factory in Mexico and would invest $US700 million at a Michigan factory, after it also came under criticism from the Republican president-elect for its Mexican investment plans. Ford's executive chairman, Bill Ford Jr, said he personally notified Trump of the decision, but after Trump's early-morning GM tweet.

GM, the world's No 3 automaker, said it sold about 190,000 Cruze cars in the US in 2016. All of the sedan versions sold in the US, or about 185,500, were built at its plant in Lordstown, Ohio. About 4500 hatchback versions of the Cruze were assembled in Mexico and sold in the United States.

"GM builds the Chevrolet Cruze hatchback for global markets in Mexico, with a small number sold in the US" it said in a statement posed on its website.

The Cruze is one of GM's best-selling cars, although its sales numbers were down significantly in 2016.

Since winning the presidential election on November 8 last year, Trump has targeted GM's rival Ford Motor Co, United Technologies Inc , Boeing Co and Lockheed Martin Corp. Trump also has touted decisions by companies to keep some production in the United States, including United's Carrier unit in Indiana.

"In this case, the tweet was specific to General Motors. But I think you've seen an overall philosophy during the campaign and since he was elected to stand up for American workers and make sure that American companies don't benefit from moving their companies overseas and leaving American workers behind," Trump transition team spokesman Sean Spicer said.

Last month, Trump announced the formation of a council to advise him on job creation comprised of leaders from a variety of major US corporations including GM Chief Executive Officer Mary Barra.

GM said in 2015 it would build its next-generation Chevrolet Cruze compact in Mexico as automakers look to expand in the Latin American nation to take advantage of low labor costs and free trade agreements.

The company said in 2015 it would invest $350 million to produce the Cruze at its plant in Coahuila as part of the $US5 billion investment in its Mexican plants announced in 2014, creating 5,600 jobs.

GM said last year it would import some Cruze cars from Mexico.

Trump, a Republican who will succeed Democratic President Barack Obama, campaigned for president using tough rhetoric on trade and promises to protect American workers, and targeted several companies by name.

According to Automotive News, GM began producing the Cruze in Mexico last year, making 52,631 cars there. In comparison, it built 319,536 of them in the United States. Previous versions of the Cruze sold in Mexico were made in a GM South Korea plant, it reported.

The shift is part of a larger trend among Detroit's Big Three automakers to produce more small cars for the North American market in Mexico in an effort to lower labor costs, while using higher-paid US workers to build more profitable trucks, sport utility vehicles and luxury cars.

In November, GM said it planned in early 2017 to lay off 2000 employees at two US auto plants, including the one in Lordstown. US small car sales have been hurt by lagging consumer demand and low gas prices. GM's U.S. Cruze sales were down 18% through November.

GM will halt the third shift at the Lordstown plant on January 23, cutting 1250 jobs.

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