Cars are already going autonomous, electric and shared — the question posed by those attending the South Carolina Automotive Summit in Greenville this week is which manufacturers will win as technology and markets face accelerating change.
Anna B. Mitchell
From a Japanese bearings maker to a Detroit-based power-train manufacturer, BMW isn’t the only global auto-industry player with Upstate ties to weigh in on the Trump administration’s proposed tariffs on cars and car parts.
A Greenville News review of letters submitted to the U.S. Department of Commerce found that at least four other Upstate manufacturers have aired deep concerns about the president’s national security investigation into imported automobiles and automobile parts.
One of those letters came from ZF North America, a German-owned company with a plant in Duncan and another recently expanded Gray Court plant, which has 2,000 workers. ZF imports $2.4 billion in components for car parts it manufactures at its U.S. plants for GM, Ford, Fiat-Chrysler, Daimler, Volkswagen, Toyota, Honda, Nissan, Subaru, Mitsubishi, Hyundai, Kia and — locally — BMW, wrote ZF’s vice president for materials, Elizabeth Umberson.
A 25 percent tariff would increase the cost of those imports to $3 billion.
“The uncertainty that would result from the imposition of any adjustments to imports of automotive parts would jeopardize our continued growth and success,” wrote Umberson, in a June 29 letter to the U.S. Department of Commerce.
Among customers that could be hit by ZF’s cost increases: the U.S. military. ZF supplies steering columns for military vehicles; braking components for Humvees; suspension components for the U.S. military partnership with Israel; and transmission components for U.S. Army industrial equipment, Umberson wrote.
“Any adjustments to imports of automotive parts in particular would harm ZF, our employees, and our customers, weakening our national economy and the U.S. defense industry,” she wrote.
President Donald Trump’s proposed 25 percent tariff on cars and car parts would be on top of tariffs imposed this spring, also on grounds of national security, on steel (25 percent) and aluminum (10 percent). He has spoken and tweeted about leveling the playing field with U.S. trading partners, citing a 10 percent European Union tariff on American cars.
But the issue is complex. The 10 percent E.U. tariff also applies to BMWs made in America — and the German automaker supports its removal; the United States, meanwhile, imposes a 25 percent tariff on imported pickup trucks, in place since the Johnson administration, according to the conservative Cato Institute.
America’s new steel and aluminum tariffs, a tariff on washing machines back in January, and a $50 billion set of tariffs on Chinese goods set to go into effect July 6 — plus retaliatory tariffs from U.S. trading partners around the globe — are already causing a ripple effect in the nation’s economy and could soon hit consumers in the pocketbook, according to the Tax Foundation and the U.S. Chamber of Commerce.
In South Carolina alone, according to the chamber, $3 billion worth of the state’s exports could be threatened.
Hardest hit: more than $2.3 billion worth of auto exports to China (all of them BMWs), $109 million worth of gear boxes exported to China, $50 million worth of refrigerator-freezers exported to Canada, and $31 million worth of lawnmowers to Canada.
Electrolux, which has a 1,900-person refrigerator plant in Anderson, submitted a letter May 11 to the Office of the U.S. Trade Representative, voicing objections to the China tariffs — specifically, on the Chinese compressors that Electrolux uses. The Anderson plant makes about 2 million refrigerators a year, most of them under the Frigidaire brand, according to the letter.
“The imposition of the of tariffs on these components will drive our costs up, and that in turn will impede growth, raise appliance prices to American consumers, and make Electrolux less competitive as compared to our competitors who manufacture appliances outside the U.S., import them into the country, but are not impacted by the tariffs,” the letter says.
The U.S. Commerce Department will hold hearings on the proposed auto tariffs on July 19 and 20, and BMW is among a slew of manufacturers and industry groups that have requested time to speak on the matter.
The tariffs would add a 25 percent cost to the roughly 400,000 engines BMW imports for X-model vehicles manufactured at its plant in Greer. Also affected would be manufacturers such as ZF, BorgWarner, JTEKT and Magna International, all among BMW’s tight, local network of globally integrated suppliers.
The sum impact on BMW of the tariffs, wrote BMW Vice President for Government Affairs Lisa Saums, could lead to “strongly reduced export volumes and negative effects on investment and employment in the United States.”
Of the 66,000 people who work in South Carolina’s auto industry, more than 10,000 of them are at BMW, according to the automaker and the state Department of Commerce.
ZF, Umberson said, has no U.S. source for nearly a third of these imported parts; as for the remainder, she wrote, shifting the supply chain to domestic suppliers would require a rigorous approval process that takes 18 to 24 months.
“Imports are not displacing domestic automotive parts in any meaningful way,” she wrote.
BorgWarner’s director of global affairs, Erika Nielsen, warned of possible job cuts. The $9.8 billion company, she wrote, sources 65 percent of its components locally and buys more than $1 billion of direct materials from 700 U.S.-based suppliers.
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“If BorgWarner requests our customers to absorb the increased cost due to a new tariff, our customers could request that we move production of these technologies to another BorgWarner facility outside of the U.S., which could decrease our U.S. manufacturing employment level,” she wrote.
James Tobin of Magna International, the largest auto supplier in North America, wrote in his company’s letter that the U.S. automotive industry has grown significantly over the past decade. Auto parts manufacturers, he wrote, employ 4.26 million people — an 18 percent increase over 2012.
“Innovation, job creation, and an integrated supply chain do not present a threat to the economic security of the United States,” Tobin wrote.
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