When President Trump picked the phone to speak to his Mexican counterpart, the agenda was to revamp the trade terms. The terms were probably already agreed, this was an act for the live TV.
Since the car industry was most anxious about the US trade relations with Mexico, the pair agreed 2 things. More components (up to 75%) for the cars will be made locally, and workers making cars will be paid at least $16 an hour. So far so good.
Ford and GM, whose enterprise values have been hit by 21 percent and 11 percent resp, should get some relief. But their problems are deeper than the US trade spat with Mexico, or even EU or China. Their overall business is in decline. They are facing competition from emerging technologies like ride-sharing apps and autonomous vehicles.
And the problem is, despite these old stalwarts investing billions in new technology to stay current, start-ups, as well as nibble rivals, are threatening their very existence.
If any doubt, just look at their enterprise value. A mere 3 times EBITDA (earnings before interest and tax etc) tells the story.
