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

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

- in Automotive

Young: “We’re not that far off.”

If President Donald Trump approves a proposed U.S.-Mexico rewrite of the North American Free Trade Agreement, a top Toyota executive says it won’t disrupt his company’s auto production.

“We can make it work,” Robert Young, Toyota’s North American purchasing chief, told Automotive News in September. “We feel comfortable that we can achieve the new requirements.”

Young made his comments as U.S. Trade Representative Robert Lighthizer prepares to submit the proposed U.S.-Mexico trade deal to Congress. Last week, Lighthizer said he would submit it even though the U.S. has yet to resolve its dispute with Canada over dairy tariffs.

Likewise, Lighthizer plans to negotiate exemptions for Canada and Mexico from U.S. steel and aluminum tariffs after the U.S.-Mexico agreement is approved.

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

75 percent of a vehicle’s content to be produced in North America, up from 62.5 percent.

40 to 45 percent of a vehicle’s content to be produced by workers earning at least $16 per hour.

75 percent of a vehicle’s steel to be produced in North America.

Increased local production of powertrains.

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

Likewise, Young says, the $16-per-hour requirement “will be easy for us to achieve,” based on current regional labor costs.

Toyota still favors a three-country trade region, however, and Young cautions that he would need to see what a U.S.-Canada deal would look like.

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

“We’re not that far off 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” strategy to its 400 North American suppliers as well as itself.

The automaker has four assembly plants in the U.S., one in Mexico and two in Canada, and it is building a new plant in Guanajuato, Mexico. That plant will launch production of the Tacoma midsize pickup next year.

The Guanajuato plant has become a lightning rod of sorts. In January 2017, Trump sharply criticized Toyota for building a new plant in Mexico. Another possible flashpoint 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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