President Donald Trump greets General Motors CEO Mary Barra (R) prior to a meeting with automobile industry leaders in the Roosevelt Room of the White House in Washington, DC, January 24, 2017.
Saul Loeb | AFP | Getty Images
DETROIT — General Motors believes it can mitigate up to 50% of potential tariffs President Donald Trump is threatening to impose on imports from Canada and Mexico, CEO Mary Barra said Tuesday.
The chief executive said the Detroit automaker has contingency plans ready for if tariffs are levied on auto parts and vehicles coming into the U.S. from the two neighboring countries. That includes potentially avoiding short-term impacts of between 30% and 50% of the additional costs “without deploying any capital.”
“We are prepared,” Barra said Tuesday during a Wolfe Research investment conference. “When we know exactly what’s going to happen and/or even have an indication of what’s going to happen, we know the steps we could take.”
GM CFO Paul Jacobson, who appeared with Barra, added that if tariffs were prolonged, the company could take additional measures such as shifting production or parts or vehicles.
The comments are the most detailed yet of how GM believes it could reduce the impact of tariffs after investor concerns about the issue weren’t addressed during the automaker’s quarterly earnings call two weeks ago, sending the company’s stock down by 8%.
GM has some operations in Canada, with more substantial production in Mexico. That includes many of its lower-priced electric vehicles as well as its highly profitable full-size pickup trucks.
Barra’s comments followed crosstown rival Ford Motor CEO Jim Farley saying Trump’s tariffs, whether implemented or threatened, are causing “chaos” for the U.S. automotive industry.
Ford CEO Jim Farley at the company’s Dearborn, Michigan, plant where it’s building the electric F-150 Lightning on April 26, 2022.
CNBC | Michael Wayland
Farley described this week’s 25% tariffs on steel and aluminum, as well as threatened levies of the same amount on Mexico and Canada, as currently adding “a lot of cost, and a lot of chaos” to the industry.
“President Trump has talked a lot about making our U.S. auto industry stronger, bringing more production here, more innovation in the U.S., and if his administration can achieve that, it would be one of … the most signature accomplishments,” Farley said separately during the Wolfe conference. “So far what we’re seeing is a lot of cost, and a lot of chaos.”
Farley and incoming Ford CFO Sherry House said a majority of the company’s steel and aluminum are domestically sourced; however, there are suppliers to the automaker that source such materials from outside of the country, which could have an impact on costs.
Barra noted GM is “evaluating” the impact of the steel and aluminum tariffs on its business, but said the company sources a “significant” amount of both from the U.S. In the short term, she said GM also has fixed pricing on such purchases.
Both GM and Ford contributed $1 million each, along with vehicles, to Trump’s inauguration. Executives with both also have confirmed they’ve talked with Trump about the auto industry.
House on Tuesday said the biggest concern for Ford is all of these actions that appear relatively minimal, including on suppliers, combining to negatively impact the automaker’s business.
“We’ll have to deal with it. That’s what I’m talking about cost of chaos. A little here, a little there. … This is what we’re dealing with right now,” Farley said.
Ford and GM stocks
Farley seemed most concerned about potential duties on goods from Mexico and Canada, saying a long-term 25% tariff that could go into effect as soon as March 1 would be “devastating” and “blow a hole in the U.S. industry that we’ve never seen.”
The White House did not immediately respond for comment about Farley’s remarks.
Farley said he is traveling Wednesday to Washington, D.C., for the second time in three weeks to meet with government officials, including members of Congress, to stress how the policy uncertainty is impacting the industry.
Last week Farley also said if the Trump administration is going to implement tariffs affecting the automotive industry, it should take a “comprehensive” look at all countries.
Farley singled out Toyota Motor and Hyundai Motor for importing hundreds of thousands of vehicles annually from Japan and South Korea, respectively, that have little to no duties compared with the 25% tariff Trump plans to impose on Canada and Mexico.
Ford regularly touts its American business, including in ad campaigns. The company is the No. 1 auto producer in the U.S., with the most vehicles domestically assembled as well as exported to other countries.
Correction: Farley seemed most concerned about potential duties on goods from Mexico and Canada. An earlier version misstated one of the countries.
