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BMW AG Chief Executive Officer Harald Krueger

BMW CEO Pleads for Free Trade After Trump Border Tax Threat

Feb. 1, 2017
"We allocate automobile value-creation in a balanced way internationally. This safeguards continuity in volatile times."

BMW AG (IW 1000/27) Chief Executive Officer Harald Krueger defended the importance of free trade, responding to recent remarks by U.S. President Donald Trump suggesting he’ll push for tariffs to protect American jobs.

"As a global company, we’re present on all important markets,” Krueger said at an industry conference in Bochum, Germany. “That also means that we allocate automobile value-creation in a balanced way internationally. This safeguards continuity in volatile times."

BMW’s U.S. factory in Spartanburg, S.C., is the German manufacturer’s largest worldwide. The plant produces BMW’s popular sport-utility vehicles for global markets and is currently being expanded to an annual capacity of about 450,000 vehicles. Krueger said BMW is the largest exporter on a net basis from the U.S., with goods worth $10 billion per year, and employs 70,000 people (including indirect positions) in the country.

"Free trade has only made this success story in the U.S. possible – 70% of the automobiles produced here are exported," Krueger said.

The German automaker’s shares climbed as much as 1% on Wednesday and traded at that level as of 12:17 p.m. in Frankfurt.

BMW, which is building a factory in Mexico to produce as many as 150,000 of its 3-Series sedans annually, joined General Motors Co., Ford Motor Co. and Toyota Motor Corp. in becoming a target of Trump’s criticism for importing cars into the U.S. without paying a substantial border tax. Trump has pledged to renegotiate the North American Free Trade Agreement and prevent automakers from shifting jobs south of the border. Kruger said on Wednesday that he expects the automaker’s “good cooperation” with U.S. administrations to continue.

When he was asked by Bild Zeitung last month about BMW’s planned facility in central Mexico -- which is being built at a cost of $1 billion and will start production in 2019 -- Trump warned the automaker that such a move would have consequences for imports into the U.S.

“I would tell BMW, if they want to build a factory in Mexico and sell the cars in the U.S. without paying a 35% tax, then they can forget about it,” Trump told Bild, Germany’s largest circulation newspaper.

German car-parts suppliers are also closely monitoring the development in North America, a key market for companies ranging from Robert Bosch GmbH to Continental AG.

"We go where our customers are and adapt to their needs," ZF Friedrichshafen AG CEO Stefan Sommer said at the conference. "We for sure won’t make any hasty decisions," he said.

The privately owned manufacturer of gearboxes, transmissions and other components boosted its U.S. presence with the $12.9 billion takeover of TRW Automotive Holdings Corp. that was finalized in 2015.

By Christoph Rauwald

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