Jobs on hold for Michigan auto parts maker as Trump tariffs loom - Detroit Free Press

Jamie L. LaReau Detroit Free Press

Published 6:00 AM EDT May 21, 2019

President Donald Trump's ongoing threat to boost tariffs to 25% on vehicles and auto parts imported into the United States might do what's intended: create a few hundred more jobs in Michigan.

Or it might do the exact opposite: force a local auto parts supplier to cut hundreds of jobs.

That looming uncertainty is what local business leader Mary Buchzeiger grapples with daily. The Trump administration's decision last week to lift tariffs on steel and aluminum from Canada and Mexico is only a minor relief for her company, Lucerne International in Auburn Hills, which imports parts from China.

"That’s all fine and lovely that we’re lifting aluminum and steel tariffs, but it's still a situation of, 'You can’t make car parts anywhere else or we’re going to tariff the hell out of you,' " said Buchzeiger, Lucerne's CEO. "So we have one great thing happen, but it’s a nosedive for the other part of our industry."

That's because carmakers and auto parts makers that import from China may be hit with a 25% tariff to import those goods. The White House had until May 18 to decide whether to slap tariffs as high as 25% on imported cars and parts based on national security concerns.

The White House said on May 17 it would delay any decision on the matter for up to six months as it seeks to renegotiate trade deals with Japan and the European Union. The administration also is embroiled in a trade war with China, on which it already has imposed auto tariffs.

More: Reports: Trump putting 25% auto tariffs on hold for up to six months

More: Trump delays imposing tariffs on auto imports and parts

Loss of 700,000 jobs

That offers only small solace. The uncertainty over a possibly higher duty continues to loom, making long-term business decisions next to impossible, said Buchzeiger.

"We have no way to make plans right now," she said. "We’re a global economy and industry, and if you expect us to make everything in this country and not give us time to make any preparation around this, I don’t see where this is going other than hurting the American people at the end of the day."

More: Car prices could jump $1,800 or more if Trump imposes 25 percent auto tariffs

The auto industry views the end of duties on Canadian and Mexican steel and aluminum as a blessing because the industry opposes additional tariffs that will raise the costs of building vehicles in the United States, said Kristin Dziczek, vice president of industry, labor and economics at the Center for Automotive Research in Ann Arbor.

“But this also extends a period of uncertainty, which makes it difficult for automakers to make investments and business decisions when you don’t know what the rules of the game are going to be," said Dziczek.

The Alliance of Automobile Manufacturers, which represents U.S. and foreign companies, said it remained "deeply concerned that the administration continues to consider imposing auto tariffs. By boosting car prices across the board and driving up car repair and maintenance costs, tariffs are essentially a massive tax on consumers."

It said those higher prices would lower consumer demand and could lead to the loss of as many as 700,000 American jobs.

Toyota blasted the tariff threat, saying last week it is "deeply engrained" in the United States and is responsible for 475,000 American jobs. 

"Today’s proclamation sends a message to Toyota that our investments are not welcomed, and the contributions from each of our employees across America are not valued," the Japanese-based carmaker said. 

Partner up

It’s not just the threat of higher tariffs that worries Buchzeiger, it's having to be nimble enough to react to a sudden hike to avoid chaos on her operations.

"If you know it’s coming you can make plans," said Buchzeiger. "It’s the surprise factor and the overnight decisions that are made."

More: Mich. firm 'out of business in three months' if auto tariffs kick in

More: US ends tariffs on Canada, Mexico steel and aluminum that cost US carmakers billions

Lucerne sells about $50 million worth of parts each year. It has 16 plants in Asia where it fabricates auto parts using steel and aluminum before shipping them back to the United States for final production for its various automaker customers, the biggest being Fiat Chrysler.

Last year, Lucerne had eight plants in Asia. It has since formed partnerships to add four plants in South Korea and four plants in Thailand. That expansion makes it more competitive, Buchzeiger said. 

"We can’t be competitive at 25% without bringing other partners online and expanding into other countries," said Buchzeiger.

Lucerne plans to open a plant in Michigan in the next 18 to 24 months to "protect ourselves against tariffs, to localize our customers and reduce the risk in the supply chain.”

That plant, Buchzeiger said, would likely create 125 to 200 jobs. But if tariffs are raised to 25%, it will ding the company's bottom line and could ultimately hamper its growth.

Buchzeiger said last year's boost to 10% on some tariffs with China reduced Lucerne's earnings by 5-7%.

"We’re doing very well, but it’s definitely painful right now with the tariff. We still produce quite a few parts in China," said Buchzeiger.

Buchzeiger said an increase to 25% would mean that Lucerne will have to renegotiate and raise the price it charges to its automaker customers because, "Our margins are already very thin so the fact that we’re facing an extra 15% is devastating. We can’t produce parts at a loss. At the end of the day, it’s the price of vehicles that go up to cover all these tariffs, so the average American ends up paying more."

Contact Jamie L. LaReau: 313-222-2149 or jlareau@freepress.com. Follow her on Twitter @jlareauan. Read more on General Motors and sign up for our autos newsletter.

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2019-05-21 10:00:00Z
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