Detroit goes to Washington

President Donald Trump's meeting with the Detroit 3 CEOs was a historic bit of political theater -- but it was no dramatic turning point.

Ford's Mark Fields, General Motors' Mary Barra and Fiat Chrysler's Sergio Marchionne convened for the first time together at the White House to speak with the new president about what Fields called a "renaissance in American manufacturing."

But a cooling U.S. sales market, high labor costs and excess capacity at current facilities likely will prevent the companies from breaking ground for new U.S. assembly plants, no matter what enticements Trump offers in the way of lower taxes and less regulation.

More than anything else, last week's hourlong breakfast meeting was proof that automakers are politicians, too. They have images to protect, agendas to advance and constituents to impress.

That explains why the Detroit 3 have changed their tone toward Trump since November, pivoting from vigorously defending against his misguided Twitter attacks to praising his pro-growth economic policies and signaling a willingness to work together. They have also timed announcements about long-planned U.S. investments to give the White House the appearance of influence. 

Both sides realize they can harness the power of optics and pursue their political agendas together: The automakers can repair the public image of them that lingers in many Rust Belt towns and Twitter screens and can bank political capital by touting investment announcements that would have happened anyway. Meanwhile, the Trump administration can profess to be delivering on its promise to make winning deals that create more American jobs. 

Other automakers with similar agendas want in. Toyota, ever eager to promote its contributions to the U.S. economy, last week announced a $600 million investment in its Princeton, Ind., plant -- with a start date more than two years away. The Hyundai-Kia group said it would spend $3.1 billion in the next five years in the U.S. and consider a new U.S. plant, while it downplayed its interest in Mexico (where Kia opened an assembly plant last summer).

At the White House last week, Trump did not make any specific requests of the executives or say he would require anything of them, according to a person familiar with the meeting. Neither did he repeat his threat of a border tax on vehicles imported from Mexico, a go-to applause line at his campaign rallies.

In any case, the administration would have limited power to strong-arm automakers into any sort of investments that were against their economic interest, says Kristin Dziczek, director of the Industry, Labor & Economics Group at the Center for Automotive Research.

The federal fuel economy and greenhouse-gas standards negotiated in 2011 were an exception, she said, because the investments could be spread over a long period of time and automakers could count on things being relatively stable over that period.

For a new plant, the time horizon for realizing investment returns "is decades long," Dziczek said. "This administration, at its long-est, will not even last a decade."

She added: "No automaker wants to put in more capacity than they need right now."

Nonetheless, Dziczek said, it was important for the three leaders to show up and express support for the president's agenda on issues such as corporate tax reform and regulation.

"You don't get to have influence if you're not at the table," she said. "They're sitting at the table and willing to talk about these things so they can have a voice when the policies get shaped."

The last time the Detroit 3 CEOs sat together at a table in Washington, they were pleading for a taxpayer-funded lifeline and were in no position to refuse the administration's demands. As a condition of the help, GM and Chrysler grudgingly committed to more small-car production and limits on executive pay. 

This time, the industry feels no pressure to commit to anything it's not already doing. 

After the meeting, the three CEOs -- either in written statements or short sound bites to the White House press pool -- said the usual niceties about how the meeting was positive and encouraging. But none offered specific plans to invest in new U.S. plants, and none backed off plans to invest in Mexico. 

Simply put, they don't need to, at least until trade policies change. 

CAR's Dziczek says 73 percent of North American investment by auto companies is already going to the U.S. But none of the Detroit 3 has opened a U.S. assembly plant since GM's Lansing Delta Township factory in Michigan came online in 2006. 

U.S. demand for new vehicles is expected to stabilize and drop slightly from 2016's record level, and customers continue to shun small cars -- so much so that FCA is abandoning the segment altogether. 

Mexico continues to be a draw because of its cheap labor, fast-growing supplier network and free-trade deals with a number of nations. LMC Automotive said in a recent study that Detroit 3 production south of the border will increase through 2020, while production in Canada and the U.S. will fall. The percentage of Mexico-built vehicles sold in the U.S. is predicted to rise, too. And LMC predicts that capacity investment in Mexico will grow at a much faster rate than in the U.S. 

To underline the point, Ford CEO Mark Fields told CNBC last week: "I think we have the appropriate amount of assembly plants in the U.S." 

Trump heard something else. In an interview with ABC after the meeting, he said the Detroit 3 are "gonna build plants back in the United States. ... We're gonna bring jobs back to America, like I promised on the campaign trail."

As long as they have business pending before the administration, the Detroit 3 can't play too cool.

A week before the inauguration, FCA was blindsided by an EPA notice of violation for allegedly using undeclared emissions control software in diesel vehicles. FCA issued a statement at the time not only denying wrongdoing but openly pinning its hopes "to resolve this matter expeditiously" on the incoming Trump administration.

It was unclear whether the diesel matter came up during Marchionne's visit to the White House. Afterward, the underdressed Marchionne was conspicuously quiet, even as Fields and Barra addressed the press outside the White House.

"I appreciate the president's focus on making the U.S. a great place to do business," Marchionne was quoted as saying in a statement FCA released later. "We look forward to working with President Trump and members of Congress to strengthen American manufacturing."

Larry P. Vellequette contributed to this report.