Layoffs From Trump Tariffs Ripple Across the Auto-Parts Industry | Company Business News

Elena Morales, the president of SMT Automation, had been preparing for a big year at the tiny Michigan maker of manufacturing machinery. 

Morales had purchased a new building and hired staff in anticipation of installing more equipment on automotive assembly lines. Her customers, who are some of the biggest automakers and parts suppliers in the US, had asked her if SMT would have capacity to take on more business.

Then, President Donald Trump’s tariffs hit, and everything changed. 

SMT makes automated equipment for assembly lines for vehicles and parts. Instead of ordering tools that would make components for future new models or build vehicles, many of the company’s customers put off such investments while waiting to see how the Trump administration’s trade maneuvers play out. 

When automakers delay a new model, companies like SMT get hurt. Morales said revenue dropped by 40% in the first quarter and she had to lay off 8 employees, cutting SMT’s headcount to 45. Most of her firm’s work is for the auto industry, she said.

“We had forecast to have a lot of work this year,” Morales said. “Now, most companies are pushing back order times. The new building is empty and we have been letting people go.”

What’s happening with SMT and companies like it shows how rapid changes in US industrial policy can roil businesses up and down the supply chain. Trump’s shifting stances on trade and tariffs have upended the planning of many companies that provide parts and equipment to big automakers. Other changes, like Trump’s move to reverse incentives for clean technology including electric vehicles, have left suppliers grappling with sunk costs and struggling to shift gears.

Trump is betting that the pain will be short-lived and that eventually tariffs will push more companies to follow General Motors Co.’s decision to invest $4 billion in adding production and workers in the US over the next two years. That could pay off for the small players that provide equipment to US factories — if they can hang on.

The auto industry built a transnational chain of suppliers in the decades after Bill Clinton signed the North American Free Trade Agreement in 1993, with metals, cars and parts flowing across borders in a finely calibrated economic balancing act. Now, car companies are having to eat the cost of tariffs while trying to decide whether to move production.

As a result, some companies that help GM and other auto giants crank out new cars are suffering. Marelli Holdings Co., a supplier for Nissan Motor Co. and Stellantis NV, filed for Chapter 11 bankruptcy protection this month. Marelli has had problems managing its debt and declining revenue, but it cited tariffs as the blow that sent it to the courts for restructuring. 

“Marelli was severely affected by tariffs due to its import/export-focused business and the imposition of tariffs specifically against automotive manufacturers and suppliers,” Chief Executive Officer David Slump said in a court filing.

Constant changes in US tariff levels have made it hard for automakers to plan and invest, and that in turn has caused pain for the parts and machinery makers they rely on. As long as the tariff outlook remains cloudy, the pain is likely to continue, some industry observers said. Trump said on June 12 that he may raise auto tariffs again.

“If we know tariffs are high, that’s one thing. If they’re going to be lowered, that’s another,” said Dan Starkey, an attorney who works with suppliers in the Detroit area. “Everything is frozen right now, and no one is hiring.” 

Big companies have been reining in their investment activity while they wait to see what will happen with tariffs and other Trump policies. In the first quarter, 220 Fortune 500 companies reduced capital spending, according to data compiled by Bloomberg. Industrial companies especially pulled back as they confronted higher materials costs and trade uncertainty.

GM reported a 33% drop in capital spending in the first quarter, though the company said it expects investment to get back on track this year. Harley-Davidson Inc. cut its comparable outlays by the same amount. Magna International Inc., one of the world’s largest auto-parts suppliers, cut fixed-asset spending by 46%. Giant German parts maker Continental AG cut spending by more than 10% in the quarter.

Magna CEO Swamy Kotagiri said in an April interview that automakers are delaying investments in new plants that would start turning out new models in two years. It may pick up once there is more certainty, but for the time being automakers and suppliers are watching their spending, he said.

Last month, GM suspended a $55 million project to make hydrogen fuel cells with Piston Automotive, a supplier owned by former Detroit Pistons basketball player Vinnie Johnson. The project was expected to employ 144 people in Detroit. GM is re-evaluating the business because of slow demand as the two companies face a Republican-led pullback in clean transportation incentives, said a person familiar with the matter. 

“There is no question that there are delays in vehicle programs and a reduction in volumes,” said Daniel Rustmann, an attorney representing auto suppliers for law firm Butzel Long. “Larger suppliers can weather it, but the smaller suppliers will be struggling.”

Other companies have decided they would rather stop producing in the US than deal with the constant flux. French technological equipment supplier Lacroix Group SA said in May that it will leave the North American market, where it employs more than 1,200 people in the US and Mexico. It plans to shutter a factory in Grand Rapids, Michigan, and lay off 115 workers in July, according to a WARN Act filing with the state.

The period of uncertainty has also caused job losses. The auto industry employed just over 1 million workers in the US in May, down more than 22,000 jobs from a year ago, according to data from the Bureau of Labor Statistics. Michigan had the largest jump in layoffs in the US for the week ended May 24, with 3,259 jobs lost, mostly in manufacturing, according to the US Department of Labor.

Financing is becoming a problem for some suppliers. When revenue falls, banks start cutting credit lines. Nishant Dixit, the co-founder of a startup that uses artificial-intelligence tools to help suppliers find new business and get paid faster, also has a business that buys receivables. He said he’s getting more inquiries.

“The banks are drying up,” Dixit said. “They aren’t giving as much credit. Contracts are being delayed so companies are looking for alternative sources.”

Trump also issued an executive order restricting the Community Development Financial Institutions Fund, which lends cash to small businesses in rural, native and urban communities. That has left smaller suppliers looking for alternative financing, said Bill Grice, executive director of the Michigan Minority Development Council.

SMT’s bank trimmed its credit line, Morales said. Her company isn’t in a cash crunch, but any new work that requires buying equipment up front would require financing, she said. SMT could sell its receivables, but Morales said she is loath to do so, because it’s expensive. Eventually, she said, the industry needs a stable environment so companies can figure out where to spend their money.

“There are companies bigger than me that are struggling,” she said. “The last thing they want to do is buy a machine.”

This article was generated from an automated news agency feed without modifications to text.