Trump on import/ export and CAT vs. Komatsu

[Wayne M.]

What an interesting article. I posted here instead of politics because I feel it's more a business article than politics. I feel he's a bit misguided with the Cat/Komat issue but right on with the small goods like Oreos.

http://www.ft.com/intl/cms/s/0/80b38ea6-e245-11e5-9217-6ae3733a2cd1.html#axzz42Oee9rgp

 

[Jim W]

Sorry Wayne the link will not work, you need to be a subscriber to the paper at least for me!

Jim

 

[Wayne M.]

I was able to get back in and I copied the text....

High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. Email -- email address removed -- to buy additional rights. http://www.ft.com/cms/s/0/80b38ea6-e245-11e5-9217-6ae3733a2cd1.html#ixzz42RBC9yih

Republican presidential candidate Donald Trump gestures while speaking at a rally at Macomb Community College, Friday, March 4, 2016, in Warren, Mich. (AP Photo/Carlos Osorio)©AP
Donald Trump used to love Apple products, Oreo cookies and Carrier air-conditioners. But as the New York property developer has made the transition from billionaire businessman to frontrunner for the Republican presidential nomination, he has made some of those same companies and firms the target of his “Make America Great Again” campaign.
While Mr Trump plans to build a wall along the US-Mexico border to keep out illegal immigrants, he has also vowed to target US companies that move manufacturing overseas — whether Apple in China or Carrier and Mondelez, the Oreo-maker, in Mexico — via a combination of tariffs and the presidential bully pulpit.
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He has singled out a number of American companies on the campaign trail. But one of his favourite targets is Komatsu, the Japanese construction and mining equipment manufacturer that competes with Caterpillar in the US and around the world.
From Iowa to Florida, Mr Trump has bashed the company, saying a weaker yen — which he blames on Japan’s monetary policy — has forced a friend of his to buy Komatsu instead of Caterpillar. But as with many of Mr Trump’s statements during the race, it raises more questions than it answers. The Japanese company actually manufactures construction and mining equipment at three factories in the US where it employs several thousand employees.
And while Mr Trump asserts that he would help companies such as Caterpillar — which he wants to use to build the wall — the head of the company has criticised some of his policies. In his capacity as the new head of the Business Roundtable, an association of US chief executives, Doug Oberhelman, Caterpillar chief executive, has said that Mr Trump’s threats to impose tariffs on US companies that include Ford, would be “very dangerous” since US multinationals depend on open markets.
“We’re 5 per cent of the world population. 95 per cent of our potential customers are elsewhere. We’ve got to learn and figure out how to deal with that,” said Mr Oberhelman.
Apple
Back in spring 2013, Mr Trump’s biggest problem with Apple was the size of its iPhones.

“I have a lot of Apple stock — and I miss Steve Jobs,” he said in a Facebook post. “Tim Cook must immediately increase the size of the screen on the iPhone,” he urged, or Apple would “lose a lot of business” to Samsung’s larger smartphones.
Mr Cook, Apple’s chief executive, delivered a bigger screen in late 2014, unlocking huge new growth for the iPhone. But now Apple is in Mr Trump’s sights again. The leading Republican presidential contender said in January he would “get Apple to start building their damn computers and things in this country instead of in other countries”. Last month, he called for a boycott of Apple products until the company complied with a judicial order to help investigators break into the iPhone used by Syed Rizwan Farook before he killed 14 people in California in December.
Only one Apple product, the high-priced Mac Pro desktop computer, has its final assembly in the US today but the company sources several components domestically, including the iPhone’s glass screen and some iOS device processors. Apple points to a study by Analysis Group, a consultancy, that found it supported 361,000 jobs at US suppliers in 33 states.
Nonetheless, increasing its US manufacturing base has not been without challenges for Apple. In one high-profile case, in 2013 it invested $578m in an Arizona supplier of sapphire, GT Advanced Technology. But GT filed for Chapter 11 bankruptcy protection in 2014 after struggling to meet Apple’s production standards and its sapphire facility is now being converted into an Apple data centre.
Tim Cook, CEO of Apple, responds to questions on October 19, 2015 in Laguna Beach, California at the opening of the 2015 WSJD Live. The event brings together top CEOs, founders, pioneers, investors and luminaries to explore the most exciting tech opportunities emerging around the world. AFP PHOTO / FREDERIC J. BROWN / AFP / FREDERIC J. BROWN©AFP
Mr Cook told 60 Minutes, the CBS News programme, in December that it was not wages but skills that kept most of Apple’s manufacturing outside the US.
“China put an enormous focus on manufacturing,” Mr Cook said, as its schools prioritised “vocational” skills. “You can take every tool and die maker in the United States and probably put them in a room that we’re currently sitting in. In China, you would have to have multiple football fields.”
Mondelez International
“Oreos, I love them, but I’ll never eat them again.”
Mondelez International was one of the first companies that Mr Trump lambasted after launching his campaign, accusing the snack maker at a rally last summer of moving production overseas at the expense of US jobs.
Mondelez, which makes Oreos, pointed out the errors in his claims that its Chicago bakery was shutting, that it was instead building a plant in Salinas, Mexico, and that by implication there would be no more Oreo production in the US.

Mondelez clarified that it was shifting nine production lines to an existing Mexican plant it is upgrading, which would result in the loss of 600 jobs. It added that the Chicago bakery would remain one of its largest production sites in the US in terms of headcount, and said Oreos would still be made in several US plants.
Talking to CNBC last October Irene Rosenfeld, Mondelez chief executive, said: “My most sane message to Mr Trump is to get your facts straight.”
Mr Trump might not be planning to eat any more Oreos, but his attachment is set to remain in the public eye. Mondelez points out that he has featured in an Oreos commercial.
And not long after he hit out at Mondelez, comedian Stephen Colbert featured Oreos in a skit on The Late Show, where he binge-ate the cookies as he mocked the businessman. The segment has had more than 3m hits on YouTube.
Carrier
The decision by Carrier, part of United Technologies, to move 1,400 jobs making air conditioning equipment from Indianapolis to Monterrey, Mexico, would normally have attracted little attention. But one of the workers captured on video the moment staff were told about the move.
The video — in which workers yelled obscenities at an impassive manager — has racked up 3.5m views in less than a month. It has also, inevitably, drawn comments from Mr Trump.
“We cannot allow this to keep happening!” the candidate wrote on Facebook. “It WILL NOT happen under my watch!”

Carrier responded that the closure had been a “difficult decision”, reached following a “thorough evaluation” of its manufacturing operations.
The weeks since Carrier’s February 11 announcement have shown the kinds of pressures that lead companies to make such decisions. On February 19, Dave Cote, chief executive of Honeywell, met Greg Hayes, chief executive of United Technologies, to propose a $90bn cash-and-share offer for UTC.
Neither the bid nor Honeywell’s subsequent abandonment of it has made any difference to the plight of the Carrier workers or the 700 from another part of UTC made redundant at the same time.
However, if Carrier sought to move the jobs while he was president, Mr Trump has said he would tell the company it would face a 35 per cent tax for bringing units manufactured in Mexico into the US.
The controversy has had some immediate effects. Carrier and UTC have had to undertake to hand back to Indiana the $1.2m tax abatement awarded as an incentive to keep work in the state.
Komatsu
Mr Trump likes to say that he has a friend who “always orders Caterpillar, and recently he ordered Komatsu tractors from Japan because they’ve cut the yen . . . to such an extent that it was virtually impossible for Caterpillar to compete”.
epa04922304 Three men watch a machine from Japanse company Komatsu at the 'Nordbau' trade show in Neumuenster, Germany, 09 September 2015. Running until the 13 September 2015 the show is northern Europe's largest congregration of those in the construction industry. EPA/DANIEL BOCKWOLDT©EPA
One problem: any “tractors” bought by Mr Trump’s friend may well have been made in the US. Komatsu runs large factories in Chattanooga, Tennessee; Peoria, Illinois, and Newberry, South Carolina.
When asked for more details about what his friend was buying, Hope Hicks, spokeswoman for Mr Trump said “pass”. Komatsu declined to comment on anything relating to Mr Trump. However, it confirmed its basic policy is to make some crucial components — such as pumps for hydraulic shovels — in Japan, while assembly takes place close to the market. That means the yen’s decline from Y80 to the dollar in 2012 to Y114 today has helped Komatsu, although economists doubt the yen is greatly undervalued. William Cline of the Peterson Institute puts its fair value at Y108.
But the company also exports products from the US, including mining equipment to countries such as Australia, which complicates any discussions about the relative impact of the yen on US jobs.
Komatsu says its US sales peaked in 2005, fell off heavily after the Lehman shock, and have since recovered in line with competitors — showing more sensitivity to US demand than to the yen. Yet on top of a brutal slowdown in China, where Komatsu’s monthly orders are down 40-50 per cent on a year ago, the company now finds itself cast as the villain in a new Pacific trade war.

 

[AEdelheit]

Last time I was in Peoria IL the first billboard leaving the airport was Komatsu welcomes you . Both good products IMO.

 

[jhenderson]

Komatsu builds good equipment but they have no mercy when it comes to replacement parts. They took over Valmet forestry products several years ago. Guys in the business soon learned just how costly that move was to them.

 

[Wayne M.]

Yes Komatsu is rough with customer relations. The point here is Trump needs to realize that both companies are now multinational. With both companies importing and exporting equipment all over the world. I want him to kick butt but he needs the straight scoop.

 

[Tuesdak]

His ideas can't be any worse than the NAFTA that started most of this and was continued with several Free Trade Agreements. Mr. Perrot was right about NAFTA and that "Giant Sucking sound of jobs leaving". In fact our own US government is Fing hostile to our own businesses attempting to move goods out of the country as I found out attempting to get the same high speed border crossings into Canada as they have coming into the USA. So I went through a mountain of paperwork and was turned down. I finally told the border crossing folks to shut the #ell up about repeatedly suggesting to us even trying it while we waited around for the customs paperwork to clear shipping RV's into Canada. All while watching stuff zoom into the USA without even slowing down at the border.

The Great Depression V 2.0 was because people suddenly didn't have jobs to pay for their homes or buy new cars. Banks even quit loaning money to buy cars. Tell me again how much We The People benefit from a Global economy using global Communist Slave Labor or Aliens in our own country - I mean if you have time after waiting in the unemployment line or swinging 2 part time no-benefit jobs just to hang on. That's right, who is going to employ your kids and where are they going to live?

Global Economy is just an excuse to cut our standard of living. The Global people who make/build iPhones can't exactly afford one. So Global is a one way street to the end of America's Middle Class. People/slaves are used in electronics because robots are more expensive.

He would have the power to do this as you should recall the rise in tire prices when Obama put a tariff on Chinese tires. There was a shortage of tires while companies pulled their tire molds out of China. (I don't run Chinese tires due to extreme quality issues and who are you going to sue again if the tires are made without a gum strip and blow out?)

In the second 1992 Presidential Debate, Ross Perot argued:

We have got to stop sending jobs overseas. It's pretty simple: If you're paying $12, $13, $14 an hour for factory workers and you can move your factory South of the border, pay a dollar an hour for labor,...have no health care—that's the most expensive single element in making a car— have no environmental controls, no pollution controls and no retirement, and you don't care about anything but making money, there will be a giant sucking sound going south.
...when [Mexico's] jobs come up from a dollar an hour to six dollars an hour, and ours go down to six dollars an hour, and then it's leveled again. But in the meantime, you've wrecked the country with these kinds of deals.

 

[BILLUA]

Where is Harvey Barlow when we need him?

 

[Wayne M.]

I totally agree, and Perot was right. Who knows where we would be if he was listened to? I will type this- I watched the dem debate last night for about a half hour, and I feel the "R" box is much much more inclined to keep this country going as we know it. It's not a pretty picture all around!

 

[Wayne M.]

Where is Harvey Barlow when we need him?

Poor Harvey. He was like a runaway 6-71.

 

[RUSSELL5000]

A magazine I always used to read years ago - can't remember which one, think it was U.S. News and World Report - did a neat thing where they asked a question and printed an answer from two different economists on facing pages. It was interesting to read and see them saying almost opposite things.

Maybe this is overstating, but I think there is general agreement that the lack of environmental standards, workplace safety standards, and fair labor standards in other countries makes trade agreements automatically uneven for the U. S.

However, I don't think Mr. Trump's solution of enacting tariffs on imported goods will solve the problem of a decline in manufacturing employment in the US. I think that would be very bad, because other countries will simply enact their own tariffs in response, reducing our exports. Consider GE Transportation Systems making railroad locomotives here where I am - largest employer in this area by a good measure. They sell to 175 countries. If those countries enact import tariffs in response to Mr. Trump's proposed import tariffs then GE locomotives will become uncompetitive in the world market. Such a situation would probably eliminate 80% of the jobs locally; the adverse impact on my community would be tremendous. I assume the idea is that new jobs would be created to provide the things we are no longer importing - I don't see how that would ever happen quickly enough to avoid an economic disaster in my community.

Mr. Trump's solution of protective tariffs is also simply inadequate. GE recently built a new locomotive plant in Texas. Jobs are leaving my community here in Pennsylvania and going to Texas. A very adversarial relationship between management and union labor has arisen over the last three decades here, and I think GE management just got tired of dealing with it. The plant did not go to Mexico, but the wages are lower in Texas than they are here locally in Pennsylvania. I note that GE recently announced expected layoffs in the local plant here due to a decline in export market demand. Maybe I missed it, but there have been no layoffs in the Texas plant. Mr. Trump's import tariff solution does nothing to address the causes of declining pay for manufacturing jobs located in the US.

We need trade agreements that allow a level playing field. Then we need to build the best products in the most efficient manner. Then we need more trade, not less. So, while I would sure agree that our past leadership has given us the short end of the stick on these trade agreements, I cannot see how enactment of protective tariffs is going to help us.