There is a limit to what can be manufactured in the US, says Fiat Chrysler CEO

Key Points
  • Fiat-Chrysler is shifting some truck production back to the United States, but there are some components that may be difficult to make outside of Mexico.
  • The issue of how much of a vehicle's parts need to come from the U.S. is the next battle in the NAFTA debate.
Fiat Chrysler CEO: Something will happen on NAFTA

Car companies may have a hard time bringing as much manufacturing back to the United States as the Trump administration would like, said Fiat-Chrysler CEO Sergio Marchionne.

Current NAFTA rules require just over 60 percent of a vehicle's manufacturing to be done in the United States, Mexico and Canada to avoid tariffs. The Trump administration has said it wants to raise that to 85 percent and wants 50 percent of that to come from the United States.

The next big battle for carmakers will be making sure those percentages are reasonable as the debate over the North American Free Trade Agreement heats up, Marchionne told CNBC at the North American International Auto Show on Tuesday.

Fiat-Chrysler said in early January it would shift some production of its Ram Heavy Duty truck from Saltillo, Mexico, to Detroit in 2020, adding back 2,500 jobs. But the company may still have to produce some components in Mexico, he said on Tuesday.

"There is a limit to what I think can be economically produced in this country, and I sincerely hope this administration understands this," Marchionne told CNBC.

It is unclear how much a change in NAFTA would affect U.S. consumers, he said.

"Tax reform is going to compensate some of the cost differential in building the car here as opposed to building it in Mexico," he said, "so we feel comfortable that we have now found the economic framework within which to get this done."