America First nostalgia is bad for American cars

Few industries do patriotism quite like autos. Clint Eastwood’s somber but stirring "halftime in America” Super Bowl commercial for Chrysler that aired in 2012, more national address than advertisement, is a touchstone of the genre. Today, patriotism isn’t just a feeling or a marketing tactic in Detroit. It is table stakes with an "America First” administration that isn’t so much wrapping the auto industry in the flag as smothering with it.

Jim Farley, chief executive officer of Ford Motor Co., began this week with a blog post touting "Another Year of Ford’s Commitment to America.” It’s unlikely to have quite the reach of Chrysler’s iconic TV ad, but that hardly matters when the key demographic consists of one man in the White House. Farley’s boasts about Ford’s domestic manufacturing prowess and exports are tailor-made for President Donald Trump, who envisions a degree of automotive reshoring that borders on autarky.

By Wednesday, Farley was bidding farewell to Doug Field, the storied Silicon Valley-implant he hired with much fanfare five years ago to help transform Ford for the digital and electric age. His departure was framed as a man moving on with his work essentially done. Yet, coming on the heels of a massive write-down of Ford’s electric vehicle efforts and with the physical manifestation of that transformation, a new vehicle platform Farley has described as a 21st century Model-T moment, still a year away, Field’s departure feels more like retrenchment than realization.

For America’s car industry, it feels like regression.

Trump’s gift to Ford, General Motors Co. and Chrysler (a unit of Stellantis NV) is his rollback of tighter fuel-economy standards imposed by his predecessor, freeing them to sell more of the trucks and SUVs that underpin their profits. In return, they must cope with his chaotic efforts to recapture past industrial greatness with a sweeping trade war.

America First, however, cannot deliver all the promises loaded onto it. Rampant reshoring in the auto supply chain may seem like it heralds a return to the glory days of manufacturing. But it will raise exorbitant vehicle prices further and eventually force factory automation on a scale that cuts the autos workforce Trump claims to champion. Tariffs and a transportation policy centered on gas guzzlers also put Detroit into something of a bubble, leaving most of the world — and eventually the U.S., too — wide open for Chinese competitors to extend their lead in electric vehicles.

Recent reports of Ford and its peers appealing for relief from aluminum duties capture the dynamic well. Fires late last year knocked out a plant in upstate New York that supplies roughly 40% of the auto sector’s aluminum sheet, disrupting production of Ford’s F-150 truck. Trump’s Iran war has pushed up global aluminum prices further.

In theory, tariffs should spur a renaissance in domestic smelting. In practice, any new, energy-hungry smelter must compete with data centers willing to pay double the prevailing average for electricity. That fire-damaged plant is a critical point of failure precisely because just-in-time supply chains help keep vehicle prices, problematically high already, from being even higher. Tariffed imports and, eventually, new smelters equate to higher costs. It doesn’t help that Trump has done huge damage to U.S. relations with Canada, the biggest source of aluminum imports. This summer’s review of the USMCA free trade agreement is a wild card looming over Detroit.

When Eastwood was pitching cars, and America, the industry was recovering from the then recent bankruptcies of Chrysler and GM. Sclerotic corporate cultures, bloated costs and over-reliance on heavy gas-guzzlers had collided with the oil price shock and financial crisis of 2008. By the early 2010s, the Detroit 3’s market share stabilized in the mid-40% range, albeit down from more like two-thirds when the century had kicked off. Come 2025, that share slipped below 40%. Shrinking has helped shore up margins in an industry with chronic overcapacity. Still, looking back over 25 years, Ford’s U.S. market share has almost halved and its total return to investors hovers around zero. (We can’t do the same comparison for GM because it went bankrupt in 2009).

China, meanwhile, looms as an existential threat, kept at bay for now by sky-high tariffs. Detroit has faced foreign competition before, of course. The Japanese and South Korean entrants eventually set up shop inside the U.S., with Detroit ceding market share but also learning from more competitive rivals.

China’s automakers are different both in scale and in kind, springing from a domestic market that is almost twice the size of the U.S. in volume and with a radically different approach tailored to the digital and electrified age. Farley himself acknowledges the quality of electric vehicles like the SU7 from upstart Xiaomi Corp.

"You think of what Apple was trying to do forever and then Xiaomi: Boom! That first vehicle, pretty impressive,” says Mark Wakefield, global automotive market lead at consultancy AlixPartners LLP. He notes how different Xiaomi’s second vehicle was from its first, reflecting a culture prioritizing speed and risk-taking. Traditional global automakers spend almost as long just doing product validation — 18 months, on average — as a typical Chinese automaker spends on the entire development cycle of a new model.

Leading-edge features and cheap price points mean unrestrained Chinese imports would likely cut a swath through the U.S. market. Tariffs on those make sense in that context, but only as a temporary measure and only if that time is used well.

Instead, the federal government has turned its back on electrification, encouraging Detroit to double down on its reliance on heavy trucks and SUVs for which U.S. demand is saturated already and overseas demand is limited. The legacy automakers have shown capacity for reinvention in the past, usually with their backs to the wall. Ford’s new EV platform is meant to come with a new manufacturing system to build it; but Field’s sudden departure before its unveiling is not an encouraging signal.

In any case, gutting federal fuel standards and protectionism are "policies that encourage them to stay fat,” says Tu Le, founder of consultancy Sino Auto Insights, and with roots in Detroit and Silicon Valley. As if to highlight the vulnerabilities and contradictions of Trump’s approach, U.S. automakers’ announcements of tens of billions of dollars in EV impairments came just before pump prices spiked on the back of the war in Iran.

Realistically, Chinese vehicles will make their way to the U.S. sooner rather than later, most likely in the sort of US-led joint ventures that Ford has reportedly discussed with the Trump administration. Canada’s recent deal to allow some imports from China, a notable break with the U.S. spurred by Trump’s aggressive posture, offers a portent. The fundamental flaw with America First as it pertains to autos is that it seeks to recreate a past in a world that is moving on at an ever faster pace, in part due to Washington’s own actions around trade and security. Patriotism often twins with nostalgia, but that is the last thing Detroit can afford at the moment.

This column reflects the personal views of the author and does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners. Liam Denning is a Bloomberg Opinion columnist covering energy. A former banker, he edited The Wall Street Journal’s Heard on the Street column and wrote the Financial Times’s Lex column.