Long before the pistons for General Motors Co V-6 engines reach the U.S. No. 1 automaker’s Romulus, Michigan plant, they are seasoned international travelers.
Powdered aluminum from Tennessee is shipped to Pennsylvania and forged at high temperatures into connecting rods for the pistons, which are then sent to Canada to be shaped and polished. They are then shipped to Mexico for sub-assembly and finally the finished pistons are loaded onto trucks bound for Romulus to become part of a GM V-6 engine.
The parts make four international border crossings in all, without a single tariff levied.
“They already have their passports,” said Jim Bovenzi, GM’s executive director of global supply chain on a recent tour of the Romulus plant. “We look at North America as a borderless region. We have parts and components coming back and forth across the border all the time.”
GM’s V-6 engine is just one example of how GM and rivals Ford Motor Co and Fiat Chrysler Automobiles NV have used the 25-year-old North American Free Trade Agreement (NAFTA) to shift work to lower-cost facilities across the continent, cutting expenses and boosting returns from the region that represents the bulk of their global profits.
U.S. President Donald Trump now seeks to replace NAFTA with the new United States-Mexico-Canada Agreement (USMCA), signed by the countries’ leaders last November, which he says will boost American jobs.
U.S. automakers have lobbied hard for the new treaty to preserve NAFTA’s effective lack of borders, and say they can work with it because it does just that.
However, if Trump follows through on his repeated threats to pull the United States out of NAFTA if the U.S. Congress does not ratify USMCA, automakers would be forced to pay a patchwork of tariffs under World Trade Organization rules...
This was excerpted from the 18 November 2019 edition of Reuters Canada.