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Escalating tit-for-tat trade war tariffs applying pricing pressure to global aftermarket suppliers

Thursday, August 2, 2018 - 07:00
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Trade machinations

“One of the biggest confusions in the automotive industry is that the components for the OEM service parts being supplied to the U.S. car companies – i.e. the ‘Big Three’ – are locally produced when they are in fact sourced from all over the world,” according to the Automotive Body Parts Association (ABPA). “They then combine them with other components claiming they are ‘U.S. produced’ but actually they are just ‘U.S. assembled.’ The proposed tariffs will result in higher prices for the OEM service parts – not just their aftermarket equivalents. With higher replacement parts costs comes higher insurance costs.”

ABPA additionally estimates that some 65,000 jobs could potentially be lost among its 150 member companies and their associated parts distributors.

“Ultimately, we believe these proposed tariffs would not improve the automotive industry, would cause the loss of thousands of American jobs, not improve U.S. homeland security and will hurt American consumers,” the organization contends. “We would ask that the administration not move forward with these tariffs and work with our international trading partners in other ways to protect our economy and country.”

Complimenting an array anti-tariff outreach efforts from the Motor Equipment Manufacturers Association (MEMA), the Car Care Association has hosted membership call-in Teleforum sessions with trade experts and pursued other actions in attempts to blunt Trump’s policies, although the President has thus far been acting on his own and rejecting proffered suggestions.

“We are lobbying the issue on Capitol Hill – where there is very little Congressional support for the Administration’s trade machinations,” says Lowe.

“We are working with members who want to engage with their Congressional representatives, encouraging them to tell their stories, submit comments – the association has also submitted comments – and we are testifying at Senate and House hearings,” he reports. “We have to keep making the case that consumers will be harmed, businesses will lose any benefits reaped from the recently enacted tax reform, and the overall economy will suffer.”

Addressing the importance of industry participants formulating trade war battle plans, Lowe advises that “at a minimum they should be assessing the possible impacts on their supply chain if they are not directly affected. If they are directly affected, they should already be working on a Plan B to minimize the impact on their costs.”

Steep Price Hikes

Entering into the heat of the summer vacation season, purveyors of specialized vehicles and auxiliary aftermarket services were ruminating over tariff-related ramifications and the prospect of negative economic headwinds.

“It’s not clear at this time what the long term effects will be from the tariffs,” says Mike VanDenBoom, president of Michigan-based Signature Truck Systems, a converter of OEM chassis into the “bobtail” delivery trucks, larger-capacity tankers, cylinder transports and vehicle-mounted cranes utilized by the propane industry.

“As of right now, we are seeing varying increases for aluminum and steel in the amounts of 3 percent to 10 percent.” Although most of the company’s metals are sourced domestically, vendor pricing is on the rise “because they have the opportunity” due to the higher cost of imported materials; some of the mobile tanks-to-be-mounted originate from Canada, others are purchased from American suppliers.

The core drivetrain/chassis units supplied by vehicle OEMs could also become more expensive, a scenario yet to occur, says VanDenBoom, “but that could change.” The possibility arises that Signature may have to raise its bobtail and service truck prices by $1,000 to $2,000 per vehicle. “It’s probably more of a cost-and-headache of doing business, and we’re keeping an eye on it.”

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