F Ford Motor Company

By Rebecca Ballhaus and Mike Spector 

WASHINGTON -- President Donald Trump on Friday met with executives of the big auto makers, who are seeking to prevent a clash between the administration and the state of California over fuel-economy requirements.

"We are going to be talking about environmental control, [Corporate Average Fuel Economy] standards and manufacturing millions of new cars within the United States," Mr. Trump said Friday, as he welcomed the chief executives of companies that included General Motors Co., Ford Motor Co. and Daimler AG's Mercedes-Benz USA at the White House.

Mr. Trump singled out Sergio Marchionne, the chairman and CEO of Fiat Chrysler Automobiles NV, for praise and lauded the company's plans to move a facility to Michigan from Mexico.

"That's what we like," Mr. Trump said. "Right now, he's my favorite man in the room."

Mr. Trump said he planned to discuss "how to build more cars in the United States" and urged the auto makers to "build them here and ship them overseas." He also credited the law overhauling the U.S. tax code that he signed last year for increasing auto manufacturing in the U.S.

The administration has sought to cut back dramatically on Obama-era emissions regulations, which are supported by California and other states. The president and his senior advisers have indicated they are ready to confront local resistance to the rules rollback, but have shown frustration over what they describe as tepid support from car makers for the regulatory initiative.

Auto makers, meanwhile, say the current standards for their cars and trucks are too rigorous and don't reflect consumer demand. But they have voiced concern that the rollback being pushed by the White House is so extensive that it will cause more problems than it seeks to solve.

The executives and the president were expected to discuss California, which has its own powers over fuel-efficiency standards and is suing to stop the administration's overhaul. That has escalated a power struggle between Washington and Sacramento that some fear could result in auto makers having to meet two different standards for selling cars and trucks in the U.S.

California has an EPA waiver allowing it to set its own standards for tailpipe emissions that many other states follow, a coalition that makes up a sizable portion of the U.S. car market. Auto makers, thus, both want relaxed federal standards and changes that California will accept, lest they face conflicting regulations across state lines that could increase compliance costs and wreak havoc on plans for vehicle designs drawn up years in advance.

Auto makers also are expected to seek clarity from the White House on its efforts to rewrite auto rules at the center of negotiations over the North American Free Trade Agreement.

Mr. Trump during a portion of the meeting to which reporters were invited again assailed Nafta, and the subsequent discussions with car executives were expected to provide an opportunity for vehicle manufacturers to sound out the president on proposed changes to the agreement's auto rules.

A Republican congressional aide said this week that negotiators could strike a "skinny deal" on Nafta that would include a thorough rewrite of the complicated rules that govern which cars and auto parts can be traded within the bloc without incurring duties.

Auto makers have showed signs of relief as the trade negotiations come to a head, with the Trump administration dropping aggressive proposals they opposed.

The U.S. now wants vehicles and significant components that move across the Nafta region to have at least 75% North American content to avoid duties when crossing borders, down from a previous proposal of 85%. The current trade pact sets the so-called rules-of-origin threshold at 62.5%. The Trump administration also has dropped a previous suggestion that vehicles be made up of 50% U.S. content to pass through borders duty free.

Detroit's three auto makers "appreciate the constructive dialogue that has occurred between U.S. industry and the administration to update the automotive rules of origin," said Matt Blunt, president of the American Automotive Policy Council, a Washington association representing GM, Ford and Fiat Chrysler, at the end of April.

Mr. Blunt added at the time that the companies were "encouraged by the direction the discussions have taken in recent weeks" and urged the U.S., Canada and Mexico to "quickly complete the negotiations."

Detroit's auto makers and other vehicle manufacturers have moved significant amounts of production to Mexico, and had grown concerned that drastic changes to Nafta would upset their business plans and potentially force higher prices on consumers.

"As the negotiations get closer to the finish line, it is important that the agreement create feasible automotive rules that treat all U.S. auto producers equally," said John Bozzella, head of a coalition of international auto makers, earlier this month. Mr. Bozzella was among the attendees expected at Friday's White House gathering.

Mr. Trump has rattled car executives dating back to his presidential campaign, questioning their commitments to U.S. jobs and threatening stiff border taxes on Mexican imports. Auto makers have responded by highlighting U.S. commitments and, in some cases, changed foreign investment plans. Mr. Trump has touted industry announcements, even some that were long-planned and not necessarily responses to his criticisms.

According to Mr. Bozzella's group, international auto makers built more than 5.1 million cars and trucks in the U.S. in 2017, just under half of all light-duty vehicle production nationwide.

Write to Rebecca Ballhaus at Rebecca.Ballhaus@wsj.com and Mike Spector at mike.spector@wsj.com

(END) Dow Jones Newswires

May 11, 2018 14:39 ET (18:39 GMT)

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