Trump’s Latest Auto Outburst Targets Toyota

January 6, 2017, 3:33 PM UTC

Updating developments in a couple of stories we’ve been talking about this week:

Trump attacks another carmaker. Having tweet-flamed General Motors on Wednesday for importing Mexican-made Cruzes, and after lambasting Ford for months on similar grounds, Trump yesterday turned his 140-character artillery on Toyota. The company is expanding production of Corollas and Tacoma pick-up trucks in Mexico for import into the U.S. – to which Trump thundered, “NO WAY! Build plant in U.S. or pay big border tax,” echoing his message to GM.

Such outbursts make for good theater but pose many problems. After issuing an explicit threat, Trump must deliver or lose all credibility. Yet House Speaker Paul Ryan is adamantly opposed to any new tariffs, let alone Trump’s threatened 35% levy on Mexican imports. Also: Toyota exports about 160,000 cars annually from its U.S. plants, but a trade war could shrink that number substantially and cost U.S. jobs. And those Corollas that Toyota plans to make in Mexico are currently made in Canada. Does Trump intend to impose a heavy tariff on Canadian imports? If so, he doesn’t seem to have mentioned it, but if not, why not?

For now, Fiat Chrysler, Mazda, Honda, Nissan, and Volkswagen – all of which have factories in Mexico – are presumably braced for impact.

-Sears gets more desperate by the day. The company is now officially burning the furniture to stay warm. It announced yesterday that it’s selling its Craftsman tool brand to Stanley Black & Decker. Investors consider Craftsman one of Sears’s three crown jewels, the others being its Kenmore appliance brand and DieHard auto battery brand. How important is Craftsman to Sears? The deal calls for payments by Stanley Black & Decker of about $900 million plus royalties for 15 years, amounting to a deal value that Sears believes could easily top $1 billion. For Sears, that’s a huge number: At the close of trading Wednesday, before the deal was announced, Sears’s market cap was $1.1 billion.

So does Craftsman actually account for virtually all of Sears’s value? Apparently not; the stock price barely budged on Thursday in response to the announcement. Investors probably figured the deal’s present value is well below $1 billion, and they probably had a Craftsman sale priced into the stock already. So maybe instead of accounting for nearly all of Sears’s value, Craftsman accounts for only a half or a third. Still – selling it is a desperate move, one of several in recent days. This week the company announced it would close an additional 104 stores, and last week it announced it had arranged to borrow up to $500 million from CEO Eddie Lampert’s hedge fund.

For the historically minded, it was almost exactly 26 years ago that Sears ceded the title of America’s biggest retailer to Walmart.

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