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How The Auto Industry Is Reacting To The Tentative U.S.-Mexico Trade Deal

ARI SHAPIRO, HOST:

As we just heard, this preliminary deal with Mexico requires more parts of a car to be built in North America to avoid tariffs. And about 40 percent of the car parts would need to be made by people paid at least $16 an hour. We're going to learn what the auto industry thinks of this from Michelle Krebs, an executive analyst at AutoTrader.

Welcome back to the program.

MICHELLE KREBS: Thanks for having me.

SHAPIRO: Well, there's a lot that's unclear about this deal. It seems pretty certain that it would raise car prices. Can you just talk us through why?

KREBS: Well, the new U.S.-Mexico agreement will push up production costs on Mexican goods. And those costs eventually will be passed along to automakers and then, of course, on to American consumers.

SHAPIRO: I want to talk about how Detroit is responding. The Alliance of Auto Manufacturers put out a statement expressing hope that any changes to NAFTA strike the right balance. Do you think this is more of a vote of confidence or skepticism from them?

KREBS: Well, I think there's concern. Will this be the deal? Canada is a key component to all of this, and now we're hearing that they may get into the game this week. There are a lot of moving parts to this, and so I think they're trying to be cautiously optimistic and upbeat. But they're still a little nervous.

SHAPIRO: Everyone seems to be so cautious and tentative in their public statements. Are you privately hearing things from your sources in the auto industry about what they're expecting or how they're reacting to this?

KREBS: What's interesting about what we're hearing or not - it's very quiet. No one wants to ruffle any feathers or say too much. I was at a conference the summer. Tariffs and trade were the biggest conversation among those present, but the automakers were being very quiet and careful.

SHAPIRO: And similar hesitation from the unions that represent the factory workers - five of the big unions put out a joint statement saying the devil is in the details. What impact do you think this preliminary deal could have on the people who make the cars?

KREBS: Well, that's yet to be seen. I mean, the hope would be that we create more jobs and good-paying jobs in the U.S. But that's not clear if that would be the case. If prices of vehicles go up, sales will probably go down some. And we could lose jobs as production is cut. But I just think we don't know enough yet to know if there will be jobs added.

SHAPIRO: And how big of an X-factor is it that Canada is not yet part of this agreement?

KREBS: Well, it's huge. You know, there are parts and cars that go across all three borders. And it's this very complicated fabric. So Canada is a key player in all of this.

SHAPIRO: Trump has threatened tariffs on Canadian-produced cars. If that were to happen, would it have a big impact on the U.S. auto industry?

KREBS: Oh, absolutely. Canada's our biggest trading partner. And I'm here in Detroit where you can see the trucks lining up on both sides of the borders to come across. It would have a huge impact. And those tariffs would definitely raise the price of vehicles.

SHAPIRO: Given the unpredictability and uncertainty of all of this, is that affecting the auto industry's plans given that they have to set things in motion years in advance?

KREBS: Right. If you think about it, this is a very long-lead business. What's being planned right now is from four years out. So it's created a lot of paralysis. I'm guessing, in the war rooms of all the auto companies, there's all kinds of scenario-playing going on. You know - what if this happens? We'll do this. But it sure would help to have all of the pieces of this trade puzzle in place so automakers could make solid decisions for the future.

SHAPIRO: The industry has been through so much since cratering a decade ago - now come back really strongly. Is there concern that this could actually be a real blow to the industry and undo some of that progress?

KREBS: Yes because we have already hit the peak of this cycle, and we're kind of coming down. We hit record sales a couple of years ago. They've been edging down the last couple of years. So there is concern that a real negative effect regarding trade could push sales even lower.

SHAPIRO: That's Michelle Krebs of AutoTrader.

Thanks for speaking with us.

KREBS: Thank you. Transcript provided by NPR, Copyright NPR.