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<\/p>\nWelcome back to the working week. If you\u2019re a fan of the complicated interplay between industrial policy, economic nationalism, and global car production it might thrill you to read about it. If you\u2019re a German automaker that relies on the United States it might kill you.<\/p>\n
The Morning Dump is going to be about politics this morning, because politics seems to be impacting every aspect of the car market. A new bill in the US House of Representatives is likely not aimed directly at Mercedes-Benz, but that\u2019s definitely the automaker most likely to be impacted. At least Mercedes doesn\u2019t produce a lot of cars in Canada. It\u2019s looking like the USMCA could be replaced with two bilateral agreements, and Canada might be the loser there. American Axle is a major supplier to GM, who might not be getting key products for truck production since\u00a0the UAW has called a strike after years of what it claims are stagnating wages.<\/p>\n
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That\u2019s a heavy TMD, so I\u2019m going to end on a special car I can\u2019t stop thinking about that was just announced this week.<\/p>\n
Congress Seems To Have It Out For Mercedes CNBC has the direct headline \u201cMercedes-Benz may be shut out of U.S. market under bill aimed at Chinese automaker ownership<\/a>.\u201d Yikes! What\u2019s going on here?<\/p>\n Mercedes the automaker (not the person) makes a lot of cars in the United States and has former football coach Nick Saban as both a dealer and champion. I do not think, realistically, Mercedes cars will end up being banned for sale anytime soon. However, there\u2019s a new bill, the Motor Vehicle Modernization Act of 2026<\/a>, which was voted out of committee last month and could have that impact as written. As\u00a0CNBC\u00a0reports:<\/p>\n Mercedes-Benz\u2019s largest individual shareholder is the state-owned Chinese automaker BAIC, formerly the Beijing Automotive Industrial Corp., with a 9.98% share. The potential implications of the legislation on the automaker are previously unreported.<\/p>\n Several people familiar with the legislation who spoke to CNBC cited gray areas in the bill that, depending on how they\u2019re interpreted, could ban Mercedes-Benz from operating in the U.S.<\/p>\n Two sources who agreed to speak on the condition of anonymity for fear of repercussions or because they weren\u2019t authorized to speak publicly said they believe the bill, as it\u2019s currently written, would ban the company.<\/p>\n \u201cThe language is unambiguous,\u201d said a former automotive policy advisor and lobbyist who was consulted about the bill.<\/p>\n If you take BAIC\u2019s ownership and add in Li Shufu, who also founded Geely, you end up with nearly 20% of the company in the hands of Chinese companies or individuals. So what language are we talking about here?\u00a0CNBC says the bill \u201cwould prohibit automakers that have \u201cany direct or indirect equity interest by a foreign-adversary government.\u201d\u00a0There was reportedly an amendment on May 21st, but I haven\u2019t been able to find it. Similar language\u00a0does appear in the Connected Vehicle Security Act of 2026<\/a>, which says this:<\/p>\n On and after January 1, 2027, the importation, manufacture, sale, resale, or introduction into interstate commerce in the United States of a connected vehicle is prohibited if\u2014<\/p>\n (A) the country of origin of the connected vehicle is a covered country or the connected vehicle is designed within a covered country, without regard to whether\u2014<\/p>\n (i) at the time of importation, sale, resale, or introduction, the vehicle is equipped with any covered software or connected vehicle hardware subject to a prohibition under paragraph (2) or (3); or<\/p>\n (ii) any such covered software or connected vehicle hardware\u2014<\/p>\n (I) is removed from the vehicle before importation, sale, resale, or introduction; or<\/p>\n (II) will be installed after importation, sale, resale, or introduction; or<\/p>\n (B) the manufacturer of the connected vehicle is a joint venture, subsidiary, or other entity in which more than 15 percent of the equity interest, voting interest, board representation, or other indicia of control, whether directly or indirectly, is owned or controlled by an entity, or combination of entities, organized under the laws of, or with its principal place of business in, a covered country.<\/p>\n That\u2019s China, for sure, since Russian car manufacturing is on its back foot and not exporting anything soon. This doesn\u2019t apply to most countries that sell cars here, because they are not adversarial. The Trump Administration has already given a waiver under existing laws to Volvo<\/a> so it can sell cars here, in spite of being owned by Geely, seemingly because Volvo goes through a lot of effort to wall off its connected cars.<\/p>\n Protecting American consumers from surveillance by a foreign government\u2013at least one we\u2019re adversarial with\u2013makes sense, and these efforts go back to the Biden Administration and are seen as being mostly bipartisan. Would Alabama Republicans be happy to see Mercedes-Benz harmed? Absolutely not. These bills haven\u2019t been passed yet, so there\u2019s still time to clarify this, though it\u2019s part of a larger move by both parties to secure American production.<\/p>\n Canada Seems The Odd Man Out In Trade Talks So Far The Trump Administration has already dropped more shoes on the car industry than a drunk kangaroo at a DSW, yet more remain. A Doc Marten-sized boot still exists in the form of whatever\u2019s going to happen to the United States-Mexico-Agreement<\/a>, which was a key piece of legislation from President Trump\u2019s first term but is no longer acceptable to him.<\/p>\n US trade representatives are in Mexico City negotiating a deal and the latest report, via\u00a0The Detroit News<\/a>, doesn\u2019t sound great for Canada:<\/p>\n As initial talks between the United States and Mexico begin this week over how to restructure the USMCA trade deal, U.S. negotiators are seeking 82% North American content in vehicles made regionally, with 50% of that value produced in the United States, four people familiar with the matter told Reuters.<\/p>\n In the past, content from Canada was so undistinguished from content from the United States that it\u2019s not even labeled as being from anywhere else. This seems to be changing, as the article mentions:<\/p>\n The shift, if accepted, would \u200cbe \u2060a major break from the current USMCA. It requires that 40% of the \u201ccore parts\u201d value of North American passenger vehicle \u200bpassenger cars \u200bbe produced \u2060in high-wage jurisdictions, effectively the U.S. or Canada. That threshold \u200bis 45% for pickup trucks. Overall, \u2060vehicles must have 75% North American content to qualify for preferential treatment under USMCA.<\/p>\n U.S. Trade Representative Jamieson Greer said earlier this week he wanted to strengthen North American rules of origin \u201cin a way that enhances U.S. content in these goods\u201d to boost manufacturing in the United States.<\/p>\n The UAW will be happy to hear this, although the UAW is a little busy right now.<\/p>\n UAW: No Contract, No Axles Both GM and Stellantis are going after Ford, which is dealing with an aluminum shortage and therefore is behind on building its super popular F-150s. GM might be in trouble itself, as the UAW is striking the American Axle plant responsible for making key parts for both the Silverado and Sierra.<\/p>\n Why is the UAW striking? The\u00a0Detroit Free Press explains<\/a>:<\/p>\n During 2008\u2019s Great Recession, with American Axle on the brink of closing, workers took the massive pay cuts to keep the facility open, the UAW said.<\/p>\n Josh Jager, Local 2093 bargaining chair, said that he was among the workers who, in 2008, went from making $29 an hour to $14.50.<\/p>\n \u201cWe did it to save the company, we did more than save them \u2014 we made them billions of dollars,\u201d Jager said of the pay cuts. \u201cSo tonight, it\u2019s about getting our fair share.\u201d<\/p>\n Workers seem to have a point here, stating that the highest wage is $22 an hour, which is less than the $29 an hour they used to make (or $44 an hour adjusted for inflation). The UAW also says that the company has generated over $8 billion in profits over the last decade.<\/p>\n I Am In Love With Tolman Edition Escort XR3i Part of me thinks I\u2019m going to have to live in England for a year just to get all of the European Fast Fords I want to drive out of my system, and UK-based car exports Tolman Engineering<\/a> are making any delays even harder with its latest creation, which is a Ford Escort XR3i that\u2019s been completely gone over to make it kinda perfect.<\/p>\n
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<\/a>Photo: Mercedes-Benz<\/p>\n
\n<\/a>Photo: Stellantis, Chrysler Brampton Assembly Plant<\/p>\n
\n<\/a>Source: American Axle<\/p>\n
\n<\/a>Source: Tolman<\/p>\n