German sector association the VDA has warned that ongoing trade tensions between the US and Europe and, separately, the US and China should not be allowed to derail the mutually beneficial relationship its OEMs currently have with the North American country. The warning coincides with news that VW and Ford are to work together to develop new vans and pickups.
Speaking at the Detroit Motor Show this week against a backdrop of rising trade and tariff tensions largely initiated by US president Donald Trump, VDA MD Klaus Bräunig underlined the importance of the US to the German car sector.
German carmakers sold 1.34m light vehicles in the US last year, representing a 7.8% share of the US market, he stressed. And with four large plants in the country operated by German OEMs and almost 330 production facilities run by German component suppliers, the US also serves as a key production base for the sector, he pointed out.
“In 2018, around 118,000 people were directly employed at their plants, more than 80,000 of them at our suppliers. Our US workforce grew by about 8,000 compared with the previous year. The companies provide jobs and create value in hundreds of municipalities in the US. The German automotive industry therefore makes a key contribution to American prosperity,” Bräunig stated.
German manufacturers have significantly increased production in the US in recent years, making the country the third largest foreign location. While total US production has doubled since 2009, German OEMs have almost quadrupled US output to 750,000 light vehicles last year.
“The US is an important export hub. Our OEMs exported 56% of their US-made vehicles to destinations like China or Europe,” commented Bräunig.
Imports of German-made vehicles into the US reached 470,000 units last year, contributing to around 16.5m new German cars sold worldwide. “With stable trade conditions, in 2019 we could break through the 17m mark for the first time,” Bräunig suggested.
But growing trade tensions – including threats by President Trump to impose 25% tariffs on imports of cars and their components into the US – could thwart this progress, he warned.
“Recent developments once again proved that the automotive industry and the jobs it provides depend heavily on free and fair trade – in the US, in Germany and elsewhere,” he stated. “Additional tariffs and local content measures to protect the industry have negative effects both on the local economy and on competitiveness. This is why we are deeply concerned about the direction that US trade policy has taken since 2017.
“We should always keep in mind that together, the EU and the US account for 50% of world trade. We could shape global trade as partners, not opponents,” he added.
Bräunig also warned about the impacts of ongoing US-China trade conflict, saying: “The situation has a major impact on our companies in the US. In 2017, German automakers exported around 150,000 light vehicles from their US production to China. One in five of all cars that we built in the US went to China. Owing to the trade conflicts, German automakers exported only 95,000 light vehicles from their US production to China in 2018.
“We therefore hope that the two countries will be able to resolve their dispute,” he continued. “China’s temporary reductions of import duties are an encouraging sign, as are last week’s talks between Chinese and American officials. But the situation still remains precarious – and another escalation might be just around the corner.”
Ford/VW partnership
Underlining the potential for collaboration between US and German companies was an announcement at the show by Volkswagen and Ford about a partnership to produce vans and pickups, in what is intended to become a broad alliance to boost competitiveness and earnings and better serve customers as the industry undergoes rapid change.
The two plan to jointly develop vans and medium-sized pickups for global markets, starting in 2022. Ford will engineer and build medium-sized pickups for both and larger commercial vans for European customers; VW will develop and build a city van.
In a separate announcement in Detroit this week, VW revealed that its first electric cars produced in North America would be made at the Chattanooga assembly plant, Tennessee, starting with the ID Crozz SUV from 2022.
The company will invest about €700m ($800m) in expansion at the plant and will create up to 1,000 new posts there, as well as further additional jobs at suppliers.
“The US is one of the most important locations for us and producing electric cars in Chattanooga is a key part of our growth strategy in North America,” commented VW CEO, Herbert Diess.
Group production of electric cars is scheduled to begin with the compact ID in the Zwickau assembly plant, Germany, at the end of 2019.
The cooperation will allow them to share investments in vehicle architecture while maintaining specific brand characteristics, said VW.
Between them, the companies produced around 1.2m light commercial vehicles last year. Worldwide demand for medium pickups and vans is expected to grow in the next five years, not least due to growing home deliveries of items ordered online.
Ford and VW have also signed a memorandum of understanding to investigate collaboration on autonomous vehicles, mobility services and electric vehicles, and say they are open to considering additional vehicle programmes in the future.
“Over time, this alliance will help both companies create value and meet the needs of our customers and society,” said Ford’s CEO, Jim Hackett. “It will not only drive significant efficiencies and help both companies improve their fitness, but also gives us the opportunity to collaborate on shaping the next era of mobility.”
His VW counterpart, Herbert Diess, added: “The alliance will be a cornerstone for our drive to improve competitiveness.”
The partnership, which does not entail cross-ownership, will be governed by a joint committee. Company executives were quoted in media reports saying the alliance could save $900m annually between them.
