- Ralph Freso/Getty Images
- The US Justice Department has opened an investigation into Ford, VW, Honda, and BMW after the automakers signaled their intent to follow a California standard for vehicle emissions.
- President Donald Trump has been engaged in a battle with California over the state’s prerogative to set its own emissions standards. His administration wants to roll back standards set during President Barack Obama’s administration.
- The DOJ is reportedly investigating the automakers on antitrust grounds.
- The car business is finding out the hard way that Trump isn’t interested in modern business.
- The Republican Party might be in favor of corporate tax cuts, but it’s ignoring Trump’s attacks on American business.
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For my lifetime, and for decades before I was born, the Republican Party was, notably, the party of business. I occasionally met an adult Democrat who was passionately pro-business, but, for the most part, when I encountered business folk, I assumed that they pledged allegiance to the GOP.
The modern GOP remains the party of corporations, which is to say, enormous financial architectures and repositories of capital that – thank the Citizens United decision – can be deployed to political ends. This constituency was amply rewarded by the Trump-propelled tax cut of 2017.
But when it comes to the actualities of business, a schism has developed between the GOP and American companies. The Trump trade war is Exhibit A, but trashing NAFTA (and then reviving it essentially unchanged, just renamed) and jawboning assorted CEOs about their production outsourcing have to be taken into account. And who can forget the once threatened border tax on stuff made by US companies in Mexico and then imported to the US?
On Thursday, the antibusiness attitude hit a new low, as the US Justice Department announced it would investigate a consortium of four automakers – Ford, VW, Honda, BMW – for cutting a deal with California to meet its emissions standards for new vehicles, rather than following a more lax standard from the Trump administration, itself a blow to regulations implemented by President Barack Obama’s administration.
Trump versus California and Detroit
- Getty Images
“The Justice Department investigation, preliminary in nature, is the latest salvo from a Trump administration that is intent on curbing California’s influence on the auto industry,” The Wall Street Journal reported.
“California has power rivaling the federal government’s in setting environmental rules for cars and trucks, irritating the president and several high-ranking officials in his administration who are working to eliminate authority they think the state has abused.”
The Golden State dustup is Trumpist business “dealing” in a nutshell: It has nothing to do with business and everything to do with Trump’s addiction to crude theater. Detroit is vaguely pro-Trump, but the leaders of the auto industry don’t want to deal with a dual national emissions standard and would prefer that the president stop telling them to shutter factories in China so that they can build more plants in the US and hire more Trump voters.
Detroit execs are on the front lines of managing what a lot of longtime Trump observers have known for years: The president claims to be a dealmaking business genius, but his business background is small-time real-estate development for a rinky-dink family operation punctuated with bankruptcies and bilked partners. More recently, even the real-estate part was supplanted by a branding-and-media hustle.
Automakers, meanwhile, are managed by well-educated and experienced executives who oversee vast global operations that send tens of billions of dollars sloshing through their balance sheets every quarter. Since he was elected – thanks to a skinny margin in several auto-industry-exposed Midwestern states – Trump has demonstrated a reliable ignorance of how the 21st-century car business operates.
- REUTERS/Ben Klayman
This is hell on car-company executives, but Trump and the administration’s tangles with the automakers play well, particularly if California – a renegade kingdom of blue – can be brought into the fight.
On a procedural level, the DOJ has a mandate to investigate collusion among businesses that might undermine consumers. “Officials are concerned the deal might artificially limit the types of cars and trucks the auto companies offer to consumers, the people familiar with the matter said,” The Journal reported.
Fair enough, but in truth, that’s a nonstarter. The US has the most competitive auto market. Consumers are awash in choice.
No, Ford, VW, Honda, and BMW didn’t ally with California to deny consumers their right to choices. They joined up out of desperation, believing that a show of unity and force would convince Trump that it really would be very bad to compel huge car companies to plan their production for the next decade with two US emissions regimes to please.
But maybe that was the wrong move. Businesspeople, for increasingly baffling reasons, think they can deal with Trump as a businessman. The sooner they figure out his business is fake business, the better off they’ll be.