U.S. Auto industry Backs Tax Relief, Delaying USMCA Start After Coronavirus

Groups representing major automakers and suppliers asked U.S. lawmakers on Friday to consider new tax relief and delay the start of a new trade deal as auto sales decline as a result of the Coronavirus pandemic.The proposals come as major automakers are temporarily closing plants and cutting production. On Friday, BMW AG became the latest to announce a production halt.

The Alliance for Automotive Innovation – representing General Motors Co, Volkswagen AG (VOWG_p.DE), BMW, Toyota Motor Corp and others – and the Motor & Equipment Manufacturers Association (MEMA) in a joint letter seen by Reuters backed “key actions” by U.S. lawmakers to help “ensure that sufficient liquidity remains available in the markets.”

The auto groups endorsed proposals supported by the U.S. Chamber of Commerce and others to create “credit facilities to provide loans and loan guarantees to employers with more than 500 employees experiencing loss of revenue due to COVID-19.”

Automakers and suppliers back a series of actions to boost the industry including delaying the planned June 1 entry into force date for the new USMCA North American trade deal. Automakers warn the fast approaching date puts undue compliance pressures on them to comply with new rules of origin.

The letter supports lawmakers giving large companies a tax deduction or credit to maintain workforce, delay or defer 2020 quarterly federal tax payments, a temporary employer payroll tax holiday and to expand or extend expensing for equipment and machinery.

In a separate letter to Congress on Friday seen by Reuters, Japanese automaker Honda Motor Co also supported the industry tax proposals.

“The auto industry, like so many industries is going to be severely harmed by the dramatic economic downturn over the coming months,” Honda executive vice president Rick Schostek wrote, adding that companies based outside the United States but with significant American operations should not be “arbitrarily barred from any federal assistance or regulatory relief.”

On Thursday, MEMA asked lawmakers for emergency grants “to keep the doors open,” tariff relief and other assistance to “prevent bankruptcies in the vital manufacturing sector.”

Estimates for how deeply U.S. and global vehicle sales could drop vary widely. Morgan Stanley analysts said in a note Thursday they were evaluating the impact of as much as a 90% drop in U.S. sales over three months. The industry letter said automakers had seen a “steep drop in retail sales over the last 10 days.”

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