German Auto CEOs’ Planned U.S. Meeting Draws European Criticism

Date: December 4, 2018
Source: Wall Street Journal
German car makers’ plans to meet with U.S. officials in Washington today drew intense criticism in Berlin and Brussels, where concerns are growing that such talks could undermine trade negotiations.
 
European officials’ criticism reveals growing impatience with what they say are repeated attempts by Washington to reach out directly to companies in an effort to pressure governments to bend in trade talks.
 
The U.S. and the European Union have been locked in tense negotiations after President Trump demanded the European bloc improve the terms of the bilateral trade relation in America’s favor. Trump has repeatedly threatened to slap punitive tariffs on EU car imports to the U.S. if the talks didn’t progress.
 
Simultaneously, the U.S. has been in regular contact with German car makers -- the main targets of Trump’s threats -- through U.S. Ambassador to Germany Richard Grenell. The Wall Street Journal reported in November that at Grenell’s initiative, the White House was weighing inviting auto makers to Washington to discuss moving more of their production to the U.S. This meeting was to take place this morning, according to industry and government officials.
 
While many German companies, as large U.S. employers, were expected to engage with the American government, German Chancellor Angela Merkel told reporters in Berlin, “trade issues will continue to be tackled by the European Commission for the EU.”
 
“Responsibility for trade negotiations rests with the European Commission…certainly not with the automotive companies,” Merkel’s spokesman, Steffen Seibert, said earlier on Dec. 3.
 
A European diplomat said that while the White House meeting wasn’t specifically about tariffs or trade, the car makers’ participation could “weaken the EU’s position” by suggesting to the U.S. it could use the companies to put indirect pressure on the negotiators.
 
Grenell said the car executives were expected to outline plans how to increase the production of key car parts in the U.S., adding “there is a big difference between assembling a car in the U.S. and building a car in the U.S.”
 
While tariffs weren’t explicitly on the table, the U.S. ambassador said, a decision by German companies to increase production in the U.S. may obviate the need for higher tariffs on European car imports into the U.S.
 
The chief executives of Volkswagen AG, Daimler AG and BMW AG have been in a constant dialogue with U.S. officials since the spring. But recently, the companies have become wary of the U.S. approaches.
 
BMW CEO Harald Krüger was so uncomfortable with the political backlash at home that he declined the invitation to attend the Washington meeting, according to people familiar with the situation. Chief Financial Officer Nicolas Peter will attend the meeting in his place.
 
Volkswagen CEO Herbert Diess flew to Washington early on Dec. 3, intending to attend the meeting. Daimler CEO Dieter Zetsche was expected to attend but the company didn’t respond to requests on Dec. 3 for comment about the planned meeting.
 
One official from a leading German auto maker stressed that the talks wouldn’t be negotiations, but rather an attempt to show Trump administration officials how much German auto makers contribute to the U.S. economy.
 
Nevertheless, Volkswagen officials have said they plan to invest more in the U.S. to boost their market share and are searching for a U.S. location to build a plant to make electric vehicles.
 
The news that BMW’s chief executive had pulled out of the meeting was a “good sign that the message is starting to sink through to the car makers,” the European diplomat said on Dec. 3.
 
European Commission spokeswoman Mina Andreeva said she wouldn’t comment on the meeting other than to say that no commission official would attend.
 
U.S. auto makers have produced cars and trucks in Europe for nearly a century and export very few vehicles across the Atlantic. Germany’s big auto makers and smaller luxury brands such as Porsche, Bentley, and Rolls-Royce export a large number of vehicles to the U.S.
 
Although U.S. manufacturers such as Ford Motor Co. enjoy a healthy share of European auto markets, the Trump administration is focused on the automotive trade balance, which is in Europe’s favor as it reflects only imports and exports. The U.S. imposes a 2.5 percent tariff on passenger car imports and a 25 percent tariff on light trucks. The EU levies 10 percent on imports of cars and trucks alike.
 
Shares in German auto makers soared on Dec. 3 after a meeting between Trump and Chinese President Xi Jinping produced a temporary truce in their trade dispute. BMW and Daimler, which export a large number of the vehicles they produce in the U.S. to China, were hit hard by China’s imposition of U.S. auto import duties in retaliation for a wave of American tariffs.
Printer-friendly version