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Volkswagen AG has been wanting to build more cars in North America.
Now, as Donald Trump embarks on a trade war that’s roiled the global auto industry, the German carmaker’s calculus has grown far more complicated.
About this time last year, the company was considering expanding a plant in Tennessee, using a factory it’s planning in South Carolina or boosting operations in Mexico. Executives are now looking primarily at options in the US Southeast, according to people familiar with the matter. A final decision may be a ways away and depends on the outlook for Trump’s levies, said the people, who asked not to be identified discussing confidential deliberations.
Volkswagen CEO Oliver Blume said he’s waiting for clarity on Trump’s trade policy before deciding how to proceed with US investments.
“Something concrete has to be put on the table,” Blume said during the company’s annual press conference last week.
The shift in plans at Volkswagen is emblematic of the disarray within the auto and auto-parts industries as the sector tries to anticipate the fallout from new US tariffs. While the end result is far from clear, the impacts are immediate: Investment decisions are being postponed as executives wait for clarity, while costs are beginning to climb in an industry where affordability is already limiting demand.
Paslin, which makes assembly lines for car manufacturers, is rethinking the best way to utilize a plant it recently opened in Mexico in light of the tariff threats. Ford Motor Co. is trying to get ahead of any levies by shipping as many engines as it can from Canada to the US long before they’re needed. Jeff Aznavorian, president of Clips & Clamps Industries, says he’s worried about contentious negotiations with customers next month over who will absorb the higher price of steel.
Confusion abounds. Just this month, manufacturers have been subject to, then spared, a 25% tariff on imports from Mexico and Canada, while also coping with a 25% — then 50% — then 25% tariff on steel and aluminum imports from Canada and elsewhere. Trump has vowed that next month will bring reciprocal tariffs on Europe and other US trading partners.
Joe Perkins has been working in the auto industry for 35 years, but even that hasn’t fully prepared him for the stress of navigating the situation. As the CEO of Paslin, he says last year was tough for the Michigan-based supplier because the slowdown in electric-vehicle demand led automakers like Ford and General Motors Co. to cancel orders. Now, an onslaught of tariffs and on-again, off-again threats for more have paralyzed decision making at Paslin’s customers, leaving orders on hold and Perkins unable to plan.
“It’s a real challenge of leadership,” Perkins said in an interview. “I am thinking day and night, how do I manage my cost structure today, without impacting my ability to really hit the ground running when sourcing opens up?”
Perkins says he has cut back on employee hours and prohibited overtime to rein in costs while he waits for things to pick up.
Paslin, which has operations in the US and China, opened a new plant in Saltillo, Mexico, in 2023, planning to ship its output to the US market, but now Perkins is rethinking that strategy because of tariffs. Since most orders from auto customers are on hold, he’s leaning on other sectors, like building automation tools for Walmart Inc. distribution centers, to keep money coming in. His long-term goal is to make 50% of his business non-automotive, up from about 30% today. Annual revenue is about $300 million.
“The industry is in paralysis,” said Michael Robinet, vice president of forecast strategy for S&P Global Mobility. “No one has any idea where to invest or how to invest. This is worse than Covid in the sense that there is a lack of a stable planning environment.”
Volkswagen, which owns Porsche, Audi and the upstart EV brand Scout, is trying to come up with a strategy for the new tariff era. It’s considering an expansion of its plant in Chattanooga, Tennessee, and looking at other sites in the southeastern US as it seeks to offset the risk of higher tariffs. Scout’s new $2 billion plant in Blythewood, South Carolina, which is set to start production in 2026, is another option under consideration.
The industry is bracing for what’s to come after winning a last-minute, month-long reprieve from President Trump on auto tariffs on March 5, on the condition that manufacturers come back with plans to invest more in the US.
Ford has hired trucking firms and secured warehousing in states like Michigan and Ohio to transport output from the Essex Engine Plant in Windsor, Ontario, over the border before any tariffs take effect, according to local union representative John D’Agnolo.
“They’re finding places in the states to store those engines so that they don’t get tariffed,” D’Agnolo said. He estimates that each truckload of engines would face $75,000 in duties if they were transported over the border under a 25% levy.
The engines are key to car assembly at Ford plants in Kentucky, Michigan and Ohio, which employ almost 20,000 workers combined. Without the parts, those plants grind to a halt.
“In reality, he’s hurting American jobs,” said D’Agnolo, referencing Trump’s threats to tariff Canadian car parts. “This is going to devastate our industry, sure, but it will devastate the American industry, too.”
Ford didn’t respond to a request for comment.
Clips & Clamps
Aznavorian of Clips & Clamps Industries, a third-generation company in Plymouth, Michigan, said the cost of carbon steel started going up right after Trump’s inauguration, long before the administration’s 25% tariff on steel and aluminum took effect. He buys the material in the US to make custom brackets and braces to hold parts together inside a vehicle.
An industry benchmark for hot-rolled carbon steel has surged more than 35% since Trump’s inauguration. While Aznavorian’s contracts allow him to be reimbursed by his customers for the higher steel prices he’s paying this quarter, those provisions expire in April and he’ll have to haggle over who will absorb the cost increases.
He dismissed the notion that adding the tariffs will bolster US steel production and help bring down domestic prices.
“When the tariff kicks in and domestic producers raise their prices because they can, all that does is reset it to exactly where you were before,” said Aznavorian, who has 49 employees and an average of $15 million in revenue a year.
Ann Marie Uetz, a partner at Foley & Lardner LLP in Detroit who represents auto-parts makers, said her clients are “hyper-focused” on complying with the paperwork around tariffs — car components can make their way back and forth across US borders as many as eight times during production. None of them are considering uprooting operations to move to the US at this point, she said.
“Most of what we’re focused on with our supplier clients is cost recovery — passing it on. Who’s going to pay for it?” she said. “Are there going to be some consolidations, are some of the smaller ones going to go under and go away? Probably. But it hasn’t led to an ongoing dialogue about bringing the business back from Mexico.”
Aznavorian has turned his regular Monday meetings with his management team into an extended war gaming session, where he reports on the latest information he’s gleaned from legal webinars, podcasts and news articles on which direction Trump might go, and trades information with his head of purchasing and production scheduler to figure out if customers are changing orders or not.
He compared the current tariff chaos to Covid times, when supply chains were disrupted and prices surged.
“I’m surprised I don’t have whiplash trying to track it,” he said.
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