Will the Trump Policies put FCA Out of Business?

03.08.17 - President Trump

One of the platforms the new President has stood on was bringing jobs back into the US, especially in the automotive industry. As one of the largest industries in the world and the one that continues to evolve and expand year over year the desire is to bring jobs back into the US, but the action that’s been proposed for imported vehicles is a high tax on the imports when they come into the country. This move could be met with serious challenges by all of the major American automotive brands, but FCA could be hurt worse than the other two.

While all three automakers, Ford, GM and Chrysler had to take some form of a federal government bailout in 2009, Chrysler was the weakest at the time and was being considered to be completely deleted from the market but the company was saved by Fiat and taken over by CEO Sergio Marchionne. Since the merger FCA has been working toward becoming a solvent company and in the positive with regards to its financial position. Currently the goal is to have the company in the black within the next two years when Marchionne plans to retire from the company.

While both GM and Ford are positioned to handle the downturn that’s coming, as the sales of vehicles is a cyclical event that has its ups and down, FCA is not positioned to take on fewer sales. In fact, the company is pushing hard to try and take advantage of the sales boom while it happens and hopefully avoid the penalties proposed by the current Presidential Administration. This means FCA is seriously on the clock to become a company that’s financially solvent and able to handle the downturn that is coming in the market.

How could the Trump policies put FCA out of business? As a company that has more debt than revenue FCA could be hurt the most with the tax penalties on imports. Instead of absorbing these taxes for the vehicles sold FCA would have to pass on the additional cost to its network of dealers and customers which would mean their vehicles could be priced out of the market in a hurry. Considering the proposed import taxes have been set at or near twenty percent, this could be a huge difference across the automotive market in the US and eventually cause FCA to close down in our country.

What could save and probably will save FCA? The fact that FCA has plants in some of the most important states for Republican voters could persuade the newest administration to be more lenient and understanding of the needs of FCA. This might even include a second bailout for the company when the next automotive market downturn takes place. Hopefully Marchionne will be successful in bringing the company into the positive before he leaves FCA. If not, we might see the “Big Three” turn to a “Big Two” when it comes to the American Automotive names.

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