Washington — The head of an Oakland County company that makes door hinges for Jeep Wranglers told officials from the U.S. Trade Representative’s office Tuesday that proposed tariffs on Chinese goods will result in a tax on 90 percent of her business.
Mary Buchzeiger, CEO of Lucerne International, an Auburn Hills-based auto supplier, testified that the Trump administration’s proposal to put a 25 percent tariff on zinc hinges and base-metal parts for motor vehicles would put her company at risk because its parts are built with materials that originate in China and Taiwan.
“Among many other parts, we produce all the hinges for the Jeep Wrangler,” said Buchzeiger, a self-described Republican voter. “We’ve been producing the door and hood hinges since 2005. We were recently awarded the next-generation contract. We have 28 parts on every four-door vehicle rolling off the assembly line in Toledo. This business amounts to roughly $30 million of annual revenue.”
The problem, Buchzeiger told the panel, is the process of producing those hinges “starts overseas” at facilities in China and Taiwan.
“We have seven long-term, strategic manufacturing partners where these hinges are manufactured,” she said. “They are then shipped to my plant in Auburn Hills, inspected and repackaged and then sent to another plant located in Milan, Michigan, where they are assembled before being shipped to the Jeep assembly plant in Toledo.”
Buchzeiger, who employs 40 in Auburn Hills, said she is “proud” of the fact that her company’s products are manufactured in Asia and said there are no U.S. companies capable of doing the same type of work.
The Trump administration is considering slapping tariffs on $50 billion worth of Chinese imports, citing an “out of control” trade deficit after a months-long investigation into intellectual property theft. The U.S. trade deficit with China grew 12 percent last year to $566 billion.
Buchzeiger told the panel Tuesday that her business cannot withstand paying a 25 percent tariff on every Wrangler hinge it produces. She predicted her Asian partners will pass the cost of the tariff on to her, forcing her to raise prices for Jeep and other auto manufacturers who will then turn to foreign suppliers not subject to the tariffs.
She expects to take a $7 million hit annually.
“I can’t swallow these costs. I don’t have that kind of margin in the program. I will essentially be forced out of business,” she said. “Make no mistake: This duty aimed at Asian companies is effectively a 25 percent tax on my company… And I resent it. I’m angry, I’m frustrated, and honestly, I’m scared.”
Buchzeiger is one of 123 people scheduled to testify about the tariff proposal during a three-day comment period that began on Tuesday. She said her company had planned to grow its Michigan employee base by 25 percent this year, but is worried that will be put on hold.
Ann Wilson is senior vice president of government affairs of the Motor and Equipment Manufacturers Association, which lobbies for auto part suppliers. She said Buchzeiger is not the only parts manufacturer worried about the impact of the Trump administration’s tariff proposal.
“We have long worked with multiple administrations on the protection of intellectual property in China,” said Wilson, who will testify before the USTR on Wednesday. “We have absolutely no disagreement with this administration on addresses those issues. We think the imposition of these tariffs will have unintended consequences and they’re not the right tool to address these IP issues.”
Wilson said the proposed tariff schedule includes multiple parts used in motor vehicles, including catalytic converters and parts for automotive air conditioners.
Wilson said the tariff proposal goes against the Trump administration previous pledges to boost the number of jobs that are “reshored” to the U.S. when it threatens companies like Buchzeiger’s that use materials from China to build parts domestically.
“The president has been very clear that they are interested in reshoring jobs,” she said. “We need to be able to have the ability to import these goods to support some of the jobs that we have here. There is very little connection between many of these goods and IP.”
Charlie Chesbrough, senior economist and senior director of industry insights for Cox Automotive, said the tariff proposal has added “a tremendous amount of uncertainty to the supply chain” for auto parts, noting that automakers typically have a long lead time for design changes and rolling out new models.
“It’s going to be very difficult for the industry to do any sort of changes to suppliers,” he said. “Manufacturers will just have to pass along the additional costs, because of the long lead time, but also because they don’t know how long this new policy is going to be in effect. Does it change in 2020 if there’s a new administration? Does it change if President Trump changes his mind later?”
Chesbrough said the proposed tariffs are likely to have ripple effects across the auto industry that affect both new-car prices and the cost of repairing older models.
“Vehicle purchases are likely to cost more money, the cost to repair is going to going to cost more,” he said. “Other expenditures will also be going up, such as food. It’s not just the expenditures on autos, but your whole wallet that is going to get squeezed.”
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