· Now that Congress has given fast track authority to the President, the next battleground lies with the actual up or down vote on the Trans Pacific Partnership (TPP) trade agreement. While the UAW continues to oppose this agreement, we at Wentzville Assembly should be particularly interested in seeing this agreement fail (and a similar agreement is in the works for the European Union). A big reason for our opposition is the proposed elimination of the so-called chicken tax. What is that, you say, and what do chickens have to do with building trucks?
This tax is a 25% tarrif applied to all imported light duty and work trucks. It was instituted in the early 1960s when some European countries placed stiff duties on imported poultry to stem the flood of cheap U.S.-produced chicken. President Lyndon Johnson fired back, imposing a 25 percent tariff on imported brandy, dextrin, potato starch and light trucks. Trucks were included to target Volkswagen, the only automaker importing pickups into the United States. The tax has been dropped on all the other commodities but it remains for trucks. While it hasn’t kept foreign brand trucks out of the US market, it has forced companies like Toyota to locate their truck manufacturing in the US, and later in Mexico and Canada as a result of NAFTA, the worst job-killing trade agreement of all time.
Our two products are somewhat unique in that there are many foreign versions of vans and midsize pickups. Just look at the Mercedes Sprinter. Currently these vans are assembled in Europe, disassembled into kits and then shipped to South Carolina, where they are reassembled into cargo vans – all to avoid the 25% tax. Recently Mercedes announced they will be building the entire van in the US. Would that have happened without the tax? The Ram Promaster is a clone of the European Fiat Ducato and built in Mexico. And the Ford Transit being built in Kansas City is the same as the European/global version. Would there have been a $1.5 billion investment in this state to build those vans minus the tax? GM has European vans similar to Transit and Promaster. Would they choose to import those instead of investing in the US?
Midsize pickups are an even better example how the elimination of this tax would potentially open the floodgates for imported pickups. While full size pickups are uniquely American, midsize pickups are built and sold in dozens of countries around the globe. Would VW start sending the Amarok stateside if the tax is eliminated? How about the global Ford Ranger, that is currently sold everywhere but the US? There’s also the Mitsubishi Triton and the Mazda BT-50. All of these could potentially wind up here. There is some good news. Most of the aforementioned pickups are built in Thailand, which is thankfully excluded from the TPP agreement. But that could be only temporary as Thailand has expressed an interest in joining at some point and the agreement as it is understood will allow for other countries to join.
As well, some if not all of these trucks would need some engineering work to pass US regulatory muster. Would that be enough of a deterrent to a company given the profits that pickups generate?
Finally, Obama administration trade negotiators have said the tariff would phase out on the longest possible timeline, as part of a bilateral U.S.-Japan side deal proceeding alongside the TPP talks, says Matt Blunt, the former Missouri governor who now runs the American Automotive Policy Council, a Washington trade group that represents Ford, Fiat Chrysler and General Motors on trade issues. Blunt said it's only fair because barriers in Japan other than tariffs have effectively kept U.S. automakers out of the country. "We believe it could take as many as 25 years to open up the Japanese market given that it's the most closed market in the developed world today," Blunt said. As the final vote gets closer we will keep you posted on any developments.
· Chevrolet, Buick, GMC and Cadillac dealers in the United States delivered 259,353 vehicles in June 2015. Retail deliveries climbed 7 percent year over year, and they were up more than the industry for the third month in a row. The drivers were stronger Cadillac sales, a 12 percent gain at GMC and a 9 percent increase at Chevrolet. Together, they helped make the month General Motors’ best June for retail deliveries since 2007 and its best June for retail market share since 2011. GM increased its sales to commercial customers, and state and local government fleets, as well. Rental deliveries, which tend to be less profitable than retail sales, were down 45 percent as a result of GM’s previously announced plan. Total fleet sales in June were down 29 percent year over year, or 21,366 units. GM’s total sales were down 3 percent.
“We just wrapped up the U.S. auto industry’s best six months in a decade, driven by strong demand for pickups and crossovers,” said Kurt McNeil, GM’s U.S. vice president of Sales Operations. “People feel good about their jobs and the direction the economy as a whole is taking, so the second half of the year should be strong too, and that’s especially good news for Chevrolet and GMC, brands that have very broad truck and crossover portfolios.”
Industry sales continue to exceed expectations. GM estimates that the seasonally adjusted annual selling rate (SAAR) for light vehicles in June was 17.3 million units.
During the first half of 2015, GM gained retail market share in both the crossover and truck segments, according to J.D. Power PIN estimates. GM’s crossover share is 12.6 percent, up 0.4 percentage points compared to a year ago. GM’s truck, van and SUV share is 38.9 percent, up 2.1 percentage points.
Most of the truck market share gain comes from the ongoing success of the Chevrolet Silverado and GMC Sierra full-size pickups, which were redesigned for the 2014 model year. Since calendar year 2013, GM’s retail share of the segment has grown 0.9 percentage points to 38 percent, according to PIN.
Market share and average transaction prices (ATPs) were particularly strong in the second quarter of 2015. According to PIN, GM’s retail share in the segment was up 2.8 points year over year to 40.2 percent. ATPs were up almost $1,000 per unit, and incentives were flat. Other highlights:
- Pickup deliveries were up 33 percent. The Silverado was up 18 percent.
- Colorado sales were 6,558 units, and it remains America’s fastest-selling pickup with a “days to turn” of 15 days. The truck had its best June sales since 2007.
- GMC pickup deliveries were up 37 percent, with the Sierra up 21 percent. Deliveries of the new Canyon totaled 2,532 units.
Tom Brune
UAW Communications Coordinator
Wentzville Assembly
636-327-2119
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