President Trump considers himself a dealmaker of the highest order — but that doesn’t mean the people on the other side of the deal ever get a chance to celebrate.
Ford is finding this out the hard way. Reporting for Bloomberg, Keith Naughton confirmed what many suspected: that Ford Chairman Bill Ford had been using his access to Trump to put the automaker in a positive position with the new White House and reverse some of the acrimony that had developed between Trump and Ford during the presidential campaign.
Ford isn’t the only automaking cutting deals — very favourable deals — with Trump, who needs jobs and investment in Detroit’s backyard, the big manufacturing states of Michigan and Ohio that the President carried in the election. I’ve argued that Trump has actually been out-dealt by the car companies, but there’s a risk in these deals that’s now becoming apparent.
The complicated art of the deal
Trump doesn’t seem to understand how various deals fit together and affect each other. In his dealmaking art, there’s no big picture, just isolated negotiations. We should have seen this coming; Trump’s business is provincial, really just an extension of his clannish family enterprise, which dates back to his real-estate developer father.
This led Trump to cut a deal with the US auto industry and solidify his administration’s ties with Ford — the US automaker that builds the most vehicles on US soil — but also blinded him to the impact that his immigration ban would have on the auto industry’s executives.
The car business is incredibly conservative. Because it has come to rely monumentally on brands over the last century, it avoids doing anything controversial. The industry also knows quite well that it can witness small mistakes snowball into massive and costly problems: a bad decision on a single part can lead to a huge recall, widespread litigation, government fines, profound damage to a brand, and needless deaths.
General Motors just recovered from one of these devastating episodes, it’s ignition-switch recall, which cost the carmaker billions and made it culpable for the deaths of over a hundred people.
The Trump distraction
The auto industry is riding high in early 2017, after setting another sales record in the US in 2016. But Trump is emerging as a major distraction. Here’s Bloomberg’s Naughton:
[S]triking up a relationship with Trump, 70, can be a delicate dance. The relationship faced its first test after Trump issued his executive order late last Friday banning immigrants from seven mostly Muslim nations.
After a weekend of phone calls and emails between Ford and Chief Executive Officer Mark Fields, the two executives refused to lend the company’s support for a policy that many viewed as a Muslim ban, despite Trump’s insistence it was not. The company Bill Ford’s great-grandfather founded is based in Dearborn, Michigan, known as America’s Muslim capital, with about one third of its population of Arab descent. Many work for Ford.
When Ford decided to cancel a $1.6-billion factory in Mexico and pledged to invest $700 million in Michigan and hire hundreds of new workers, the company gave Trump exactly what he wanted: a headline (if even the carmakers had already decided to back out of the project, as it said at the time). Looked at from almost any angle, it was a good deal, even if it wouldn’t generate a massive number of new jobs.
The immigration ban executive order was a deal aimed at satisfying a different Trump constituency, but it damaged the Ford deal because the carmakers had tacitly agreed to support the new President. For Ford, that was worth it in exchange for a corporate tax cut and a rollback of regulations. Even a border tax was something that Ford was prepared to handle.
Can’t trust the deal
This is alarming. Trump rode into office on his credibility — which many contemporary business observers would say was fading, if not vanished — as a dealmaker extraordinaire. But deals that involve the entire business structure of the United States, not to mention the rest of the world, are many orders of magnitude more complicated that what Trump has managed in the past.
His pattern when he was shaping his reputation was to see every deal as including effectively two stakeholders — himself and the other guy. To a degree, the other guy always had to lose.
The auto industry got ahead of this by handing Trump an easy win right out of the gate. And then Ford, along with any other car company that was made uncomfortable by the immigration ban, got burned.
Bill Ford in particular might not like this.
“This is a cutthroat business,” Ford told Business Insider at the Detroit auto show last month.
Ford is a man who’s trying to lead his family’s 114-year-old business into the future. He lived through the financial crisis and saw Ford at one of its lowest points. He’s done what he needed to do to set things on the right path with Trump.
And then Trump botched the deal.
This is an opinion column. The thoughts expressed are those of the author.
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