Is Ford changing its investment plans in Mexico because of Donald Trump? Perhaps. But don't take the tweets at face value.
Americans are easily distracted. So take any headlines about big job announcements for which Donald Trump takes credit with a salt mine full of salt. Case in point was the Carrier announcement in Indiana, where the company appeared to capitulate on sending 1,400 jobs to Mexico. In reality, in exchange for $7 million in tax incentives, Carrier will keep about 800 jobs in Indianapolis, for now, and still close a plant in Huntington, Ind. And it will still move hundreds of jobs to Mexico. Specifics about the deal have yet to be revealed.
An even more egregious situation came last week when Trump said Sprint would bring back 5,000 jobs — and that’s just the way all too much of the media reported it. The reason, according to the President-elect: “Because of what’s happening and the spirit and the hope I was just called by the head people at Sprint and they’re going to be bringing 5,000 jobs back to the United States.” In fact, those jobs were part of an investment commitment made before the election and a fraction of jobs lost in the telecom sector.
Peel away a layer, and we find Sprint’s owner, SoftBank of Japan, controlled by the billionaire Masayoshi Son, known as Masa. It doesn’t take a Nobel laureate economist to realize he’s currying favor with the new administration in hopes it will go easy on antitrust matters. Sprint made a play for Bellevue-based T-Mobile in 2013, but Obama regulators turned it down because it would seriously cut market competition. A merger would also require the elimination of thousands of jobs and be a big loss for the Puget Sound region. But it’s a sweet play for Son in the Trump era. No wonder the New York Times editorialized about this as an example of the crony capitalism to come.
Today, the headline news is that Ford suddenly killed plans to build a new $1.6 billion assembly for small vehicles in Mexico and invest $700 million, and add 700 jobs, to make electric cars in Michigan. Ford will still build the Focus in Mexico, only at an existing plant. Meanwhile, Trump threatened General Motors on Twitter: “General Motors is sending Mexican made model of Chevy Cruze to U.S. car dealers-tax free across border. Make in U.S.A.or pay big border tax!”
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The long-term meaning of Ford’s move for American manufacturing jobs is unknown. We’ll see how it unspools in the coming days and months. The biggest manufacturing investment was just announced by Foxconn in China, an $8.8 billion flat-screen television factory (and I suspect it will be heavily automated).
Be skeptical. Read past the headlines and Trump’s self-promotion.
Today’s Econ Haiku:
Wall Street tried and true
The January effect
Taxes, not prophets