Imposing higher tariffs on imported cars, trucks and automotive parts significantly affect the Supply Chain because the Automotive Supply Chain today is global. Some foreign automakers make vehicles in the USA, and some USA cars are made overseas, and cars are assembled from parts made all over the world.
We mention here a study case about Bill Brebrick who is the USA Sales Manager with Zapp Precision Wire, a German steel company with several factories in the United States, and the way he is affected by this new higher tariffs on imported cars.
Hereafter, his clear explanations related to how his company fits into the global Automobile Supply Chain.
“We're a family-owned German company, 300 years old. We take raw material — billets or ingots — and we form them, we cold-work them. We turn them from big pieces of steel into smaller close tolerance pieces of iron, and then we sell those to people that machine parts or fabricate parts for a wide variety of industries, including automotive. Then, we supply a wide array of materials for injection systems, wiper blades, cosmetic pieces of steel. It's a wide assortment.
When asked what he think of the latest news of this potential tariff imposed to imported cars and how his Supply Chain in affected, he answered that many brands (BMS, Mercedes, Volvo) have a presence in the USA. People build factories near these plants, support them and give work to thousands of people, making this market a global one, competing with businesses around the world, and now these policies threaten multiple jobs.
What does it make an imported car an imported car?
Brebrick answered: “Well, the only thing that makes up a German car a German car, or Japanese car a Japanese vehicle is where their headquarters is. And OK, maybe the profit dollars go back there and maybe there are shareholders there. But the car itself, the components, the assembly, the manufacturing, the subcontractors, the Supply Chain is often in that country, and in the USA, that's the case. These are USA companies.”
“We're a family-owned company, and I think there are lots of people in the Supply Chain that are family owned, and, you know, to hear that we're going to be punished or tariffed is a little confusing. We are making German cars in the USA.”
And, what will happen when this sudden tariff become 25 per cent more expensive overnight?
“I guess that cost will have to be passed along or it'll have to be managed. Someone has to pay for it. Either, charge it to the end user, or they're going to have to cut costs, and that can sometimes mean headcount reductions.” was his afflicted answer.
This American policy has made it necessary for many car-making brands to organise themselves and requests for an exemption; they have filed to apply for some of the imported steel to produce parts to use in different parts of a car, but because of the complicated bureaucracy, there is not still an answer.
This conflict between this tariffs and car brands still have a long way to go. Postponement of the tax for European Union companies could, in some way, alleviate this tension, as with this policy many Automotive Supply Chain around the globe are now severely affected.