White House presses German automakers to expand U.S. investments

WASHINGTON (Reuters) - President Donald Trump pressed senior executives of leading German automakers to expand their investments in the United States as the White House considers imposing new tariffs on European-made vehicles.

Volkswagen AG CEO Herbert Diess speaks after a meeting between senior Trump administration officials and top executives of Volkswagen AG and Daimler AG at the White House in Washington, U.S., December 4, 2018. REUTERS/Kevin Lamarque

German automakers said after the meeting they told Trump they planned to boost U.S. investments, but warned they would be unable to do so if the administration imposed new tariffs.

Volkswagen AG VOWG_p.DE and Daimler AG DAIGn.DE executives both said they thought the chances that new tariffs will be imposed had been lessened following the meeting.

Volkswagen CEO Herbert Diess said the company was "considering building a second car plant" and was in talks with Ford Motor Co F.N about a broader alliance. He said it could include VW using unused Ford capacity to build cars.

“The president has a point,” Diess said, saying officials “tried to convince us to invest more into America and we are prepared to do this.”

Daimler chairman Dieter Zetsche told reporters that additional U.S. investments are contingent on conditions remaining the same. Zetsche said the “implicit potential threat” of new tariffs had been reduced after the meeting.

BMW AG BMWG.DE said in a statement that it plans to invest $600 million more at its Spartanburg plant in South Carolina through 2021 for future generations of the BMW X models and will create 1,000 more jobs by 2021.

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Diess said he thought the companies had “made a big step forward to avoid the tariffs.”

Commerce Secretary Wilbur Ross, U.S. Trade Representative Robert Lighthizer and White House economic adviser Larry Kudlow were among those who met with the executives.

Trump has threatened to impose stiff tariffs on cars assembled in the European Union as part of his “America First” trade policy.

White House trade adviser Peter Navarro told Fox Business News Tuesday that he thinks “we have a really good path to coming up with having these companies invest more in America.” He added that the German automakers “wouldn’t be coming to the table here to talk to us unless the president had auto tariffs on the table.”

Although the European Commission handles trade negotiations on behalf of the common trading bloc, the Trump administration has summoned the auto bosses as part of a campaign to “rebalance” global trade flows.

Last week, BMW said it was considering building a second manufacturing plant in the United States that could produce engines and transmissions, drawing praise from Trump, who has made the revitalization of U.S. manufacturing a key pillar of his economic program. On Tuesday, BMW emphasized that it had not yet made a final decision.

Zetsche said it is “impossible” to build all vehicles sold in the United States because of small volumes of small luxury cars.

The Commerce Department has circulated draft recommendations to the White House on its investigation into whether to impose tariffs of up to 25 percent on imported cars and parts on national security grounds, Reuters reported in November.

Kudlow said he did not think that car tariffs were imminent, though he added that they were in Trump’s “quiver of arrows.”

A U.S. government official briefed on the matter told Reuters on Monday that no final report on the investigation is expected for at least a couple of weeks.

Reporting by David Shepardson; Editing by Paul Simao and Grant McCool