After Tariff Threat, Apprehension and Shock Among Detroit's Businesses
By John D. Stoll
AUBURN HILLS, Mich. -- In this northern Detroit suburb, tariffs could tilt the equation for local businesses.
India's Mahindra & Mahindra Ltd., a leading tractor seller that has manufacturing operations here, on Friday started selling its Roxor off-roader to the public, and online orders were coming in by the minute.
At the time, news was piping out of Washington about President Donald Trump's planned tariffs on steel and aluminum.
To build the $15,500 Roxor, Mahindra uses hydraulic lines shipped from California, seat-belts from Indiana and instrument panels from a supplier only a few cities away. Yet the bulk of the parts needed to assemble it are delivered to Auburn Hills in five containers coming from India.
The Roxor is an unusual vehicle, looking much like Fiat Chrysler Automobiles NV's iconic Jeep Wrangler, but priced and equipped to compete with four-wheelers that aren't certified for highway use. Unlike certain competitors that rely on plastic for much of the body, the Roxor's 3,000-pound body is forged from nearly finished steel coming from outside America's borders.
Because the Roxor doesn't quite fit a type, Mahindra has wiggle room on the price tag in the event of a spike in material costs. "A product becomes price sensitive when there are many different products" like it, said Pawan Goenka, the company's longtime automotive chief, in an interview near the factory floor.
Still, Mahindra's new vehicle is targeted at ranchers, farmers, off-road enthusiasts and motor sports junkies, limiting its demand to specific regions, analysts say. Depressed prices for commodities, including corn and oil, could threaten a significant slice of the target audience.
Other customers, using all-terrain vehicles for hunting or trailblazing, could cut back if a trade war cripples the economy or costs Americans their jobs.
Mahindra sank tens of millions of dollars in Auburn Hills and neighboring Pontiac and created dozens of jobs. Mr. Goenka says that even though the company could pass commodity increases to Roxor customers, President Trump's trade policy could affect plans for near-term expansion.
For now, he isn't panicking. "Tariffs go up and down," Mr. Goenka said during an event introducing the new product. "We're not importing steel, so we don't know what we are doing will be affected."
Meanwhile, less than a mile from Mahindra's factory, executives at small auto-parts supplier Lucerne International are puzzling over what the tariff plan means.
"I woke up to crazy headlines about tariffs on steel and aluminum 'products,' but I have no idea what that actually encompasses. Raw material? Blanks? Unfinished product? If it includes finished, machined components, then I'm absolutely screwed," wrote Chief Executive Mary Buchzeiger in a text exchange while in China conducting engineering reviews.
The 43-year-old executive splits time between Michigan and China, where she sources components that are shipped to Auburn Hills, finished and then used on the doors of Jeep Wranglers and other automobiles. The White House, she says, hasn't delivered enough clarity for her to know how Lucerne will be affected, or how the policy could affect the price of a Wrangler, which is Fiat Chrysler's most profitable product.
Machined steel and aluminum components represent 85% of the $35 million worth of products she sells annually.
Ms. Buchzeiger is planning to move her family to Asia this summer, hoping to take advantage of more global opportunities.
"So many companies world-wide can't make long term plans in the U.S. because of our current administration," she said. "I am moving my family to China this August to focus my growth [where] I can make long-term plans."
--Chester Dawson contributed to this article.
Write to John D. Stoll at firstname.lastname@example.org
(END) Dow Jones Newswires
March 06, 2018 05:44 ET (10:44 GMT)Copyright (c) 2018 Dow Jones & Company, Inc.