Auto Suppliers: Trade Groups have a View, Does Washington Even Ask?

We break out some excerpts from auto supplier views from the trenches on auto tariffs.

Mar 11, 2025

We like to read commentary in trade publications without the EPS spin and pep talks from quarterly earning calls even if those earnings calls are also very important for what they provide.
We share some comments below from the auto supplier trade groups, and they tell a very negative story on auto industry and raw material tariffs (steel, aluminum, copper). Trade level commentary and surveys step around the politically “axed” version of tariffs from the Trump cabinet members or the filtered view of OEM CEOs/CFOs who need to worry about retaliation from a White House well known for such behavior.
The policy architects spin their tariff rationales while skipping the economic realities (e.g., Who pays the tariff? Trump says the seller does. Is he correct? Answer: No). When they say, “Tariffs are about fentanyl,” they really mean “It is about evading Congressional checks and balances.”
Suppliers are often victims of “it all flows downhill” from the OEMs, and supplier chain disruptions and financial stress along the Tier 1, 2, and 3 chains have always been a challenge to auto production during hard times for the suppliers. Making them harder does not help.
Tariffs are the main problem now, but the need to shift investments, capex, and strategy away from EVs has also been somewhat of a whipsaw. Trump has an undeclared war going on non-Tesla EVs and the Inflation Reduction Act, and that flows into threats to manpower needs and embedded capex. That means layoffs and more downsizing.

The above table details the stock returns for a peer group of public US-centric suppliers and looks back across a mix of time horizons. We closed the numbers as of March 9. The stock numbers were mixed on “stock market sell-off day” (Tues. March 10). Only 2 of the 10 supplier stocks on Tuesday did worse than the S&P 500 (Dana, Aptiv).

The basic story does not change. These suppliers have a range of product mixes and customer exposures and have various strategies in areas such as EVs. Those topics are for other days. For this summary, we line the suppliers up in descending order of 1-year returns. We included some names such as Goodyear in the chart as a HY bellwether name in autos, but GT as an operating story is more about the replacement market in tires and petrochemical costs than new vehicle supplies. Some have more exposure to light vehicles and some have a heavy commercial vehicle component.

Obviously, there are a lot of negative returns in the mix looking back across a range of timelines. As an example, Dana had announced some major asset sales and a shift in strategy (selling off highway operations, reduced EV investment, etc). Some global players are in very good shape (Autoliv), some have high China supplier chain exposure, some are tied into Mexico in a major way. Those issues are for separate commentaries.

The takeaway from looking at this table of returns is that this is a brutally challenging subsector within the auto production chain that runs from commodities to tiers of suppliers to OEMs and then downstream to dealers.

Considering US light vehicles rebounded to 16 million in 2024 from 15 million handles in 2023 and that December 2024 set up 2025 with a 17 million SAAR rate, the hopes were high. However, we are now in an all-new game with tariffs and notably the Mexico and Canada connection. What might be coming down the pike with Japan and South Korea is purely speculative at this point (see Auto Tariffs: Japan, South Korea, and Germany Exposure 2-25-25 ).

Some feedback from the auto supplier trenches…

The statement from supplier trade groups is worth a look, and they seem to get little airtime. They live in the trenches and know the business. They are not political mouthpieces. Auto supplies and components are their livelihood. Trump will call them globalists if they complain, but he won’t admit to negligible due diligence on the side effects of his tariff programs on these companies. After all, in his mind, the “seller pays” the tariff.

Globalist is a dirty word in MAGA land, but if you drive down a major road in US dealership areas and look at the signs you see Toyota, Honda, Nissan, Hyundai/Kia, BMW, Mercedes, Jaguar, Porsche, Land Rover, etc. That is global, and those brands are heavily invested in real estate and financial services and payrolls in every metro area of the US. For the Japanese, South Korean, and German OEMs with their supplier chains, they are also heavily invested in US manufacturing– mostly in red states with right to work laws.

WHAT THE AUTOS SUPPLIERS SAY

A recent MEMA survey (Motor & Equipment Manufacturers Association) highlights industry sentiment regarding the tariffs: 

82% of suppliers say tariffs on goods from Mexico will have a negative impact on their business. 
68% of suppliers say tariffs on goods from Canada will harm operations. 
During the first month of tariffs, suppliers anticipate: cutting or delaying investments (24%), modifying supply chains (21%), cutting U.S. jobs (13%) 
By six months, these impacts are expected to increase significantly: cutting or delaying investments (57%), modifying supply chains (75%), cutting U.S. jobs (47%), shifting production outside the U.S. (33%)

The vehicle supplier industry operates within a deeply integrated North American supply chain, with components frequently crossing borders multiple times before final assembly. The United States-Mexico-Canada Agreement (USMCA) was designed to facilitate regional trade and support economic stability, and these new tariffs represent an unexpected shift for suppliers.

Relocation and customer realignment?

We saw some additional pushback to tariffs in commentary that even signaled the pressure to relocate if the “suppliers to the suppliers” see tariff actions last for years. Tariffs punish and undermine the cost structures for many in the US. After all, many suppliers have suppliers of their own.

Then there is the revenue aspect of the customer costs and simple fact that crossing the border would drive up the costs of their products to their customers, result in lost revenue and potentially drive a switch to another supplier in a different domicile with different border and tariff supplier chain dynamics. Anyone who has listened to the people in the industry or read any analysis of how they operate would see myriad negative impacts on those with operations within the US and already operating here.

Per Automotive News citing MEMA:

A third of U.S. suppliers said they would move production outside the U.S. if 25 percent tariffs on Canada and Mexico persisted for six months, according to a February survey by MEMA Original Equipment Suppliers, which represents U.S. parts makers.
Companies may source some components outside of the United States-Mexico-Canada Agreement region to places such as Honduras, Nicaragua, Singapore, Thailand and the Middle East, in order to avoid higher prices from tariffs, said Mark Wakefield, global automotive market lead at AlixPartners.
Suppliers could “do more of the value-add in a country that isn’t subject to these tariffs,” he said. “They’ll be in discussions with those countries about how they can get some financial aid or support or credits to support certain types of suppliers.”

The above excerpt is from one of the auto trade rags and flags some of the anger welling up in the industry. One quote above again cites the “MEMA Original Equipment Suppliers.”

Trump has left trade groups scratching their heads on tariff policy…

Historically Trump had clashed with the Chamber of Commerce (with its very strong sense of fair and free trade). The Chamber of Commerce was more like a GOP support group across the years, so that makes a statement that Trump started attacking them during Trump 1.0. The leaders of the Chamber of Commerce and National Association of Manufacturers (NAM) are not the types to have AOC and Senator Warren on speed dial(!!).

A recent NAM survey published this month in (last week) highlights the cost and inflationary pressures ahead. The language was less aggressive than the auto suppliers trade group, but the point is that their prices would rise like those seen in 2022.

Key survey findings:

Manufacturers expect raw material prices and other input costs to rise 5.5% over the next year. This marks the highest anticipated rate of increase since Q2 2022, when inflation hovered between 8% and 9%.
Manufacturers expect prices on their company’s product line to increase 3.6% over the next 12 months, up from 2.3% in Q4 and the highest level since Q3 2022 when inflation was still more than 8%.
Manufacturers expect export sales to increase just 0.1% over the next 12 months, the lowest level since Q2 2020—the height of the COVID-19 pandemic—highlighting challenges in global trade and demand.

The subtle message (my translation) is, “Inflation is heading higher, our costs are rising, and our export sales will stagnate. Thanks a ton, Trump.”

The earlier chart above on auto supplier stock returns certainly drives home that times are always challenging for auto parts companies. Those times are now just getting worse on the tariff fixation that simply rejects the idea of global supplier chains and the extremely complex nature of how automotive supplier chains work.

Supplier peer group context: most are small in size and lack clout…

The above chart offers a reminder of the small size of the “major” suppliers in the US. Some of the major OE suppliers in the world that serve the transplants and dealers in the US are not in this chart, but that is a story for another day. The message is that the OE suppliers are small in comparison to their OEM customers.

Auto industry history is filled with stories of pricing pressure from the OEMs (contractual price de-escalators, capex commitments, etc.). The suppliers spend heavily and then take the volume risks on new, high-volume models that might “flop.” They face high levels of tech investment in new/emerging technologies (more dramatically of late in EVs), raw material cost risks (suppliers typically take that risk and generally cannot pass them through. They can beg.). They face union pressures in a balkanized industry for labor, and the OE suppliers always face generally challenging relationships with some OEMs.

The OE supplier industry especially is brutally competitive and hard enough under the best of conditions. Trump’s tariff plan is presenting them with the worst of conditions since tariffs hit their products directly, will increase raw material costs, will hurt their customers, and will raise prices on vehicles. When the OEMs face pressure, once again it flows downhill and burdens are shared with suppliers. The “suppliers to the suppliers” dynamics (Tier 2,3) only makes the tariff wildcards more complicated. Currency impacts are like the supplier chain – all over the map.

In the end, the moving parts add up to a rising risk of financial stress and supplier chain disruptions posting some possible threats to production volumes. It only takes a few supplier chain breakdowns to unravel the supplier-to-OEM production pace. Toss in semiconductor tariff threats, and we have seen the volume movie before.

Volumes also tail off in a recession. That has led to a spate of layoffs, retrenchment in R&D, and revised capex plans across product segments in the supplier sector. Strategic shifts are underway for many. Dana is a good example of changing game plans with the sale of its off-highway business and revising its EV scale. Meanwhile, Lear is doing large-scale layoffs and divesting some assets.

After covering suppliers on and off for a few economic cycles since the 1980s, I remember that many of the leveraged suppliers on HY roadshows of the 80’s are long gone, bankrupt, liquidated and/or buried. I always remember one of them from a 1980s roadshow (Harvard Industries) that filed Chapter 11 at least 3 times. Many BBBs became CCCs on the way to being a “D” (default). Some operations were rolled up into European players via M&A while Japanese players had some assets rolled into JVs with US operators.

Some major suppliers that were spun off by the legacy Detroit 3 across the decades as they look to reduce fixed cost structures (Delphi, Visteon, etc.) went through Chapter 11 overhauls over the years and later were part of even more breakups along product lines. Some of the spin-off and bankruptcy “shrapnel” found its way back to OEM balance sheets (notably “old GM” before its Chapter 11).

The Machine that Changed the World faces a new world.

I have often highlighted, The Machine That Changed the World (1990), as a “must read” to understand how “lean manufacturing” evolved. MIT had organized a broad, multi-year auto industry study funded and supported by the automakers to examine and analyze what back then was called the Toyota Production System. The idea that a fully integrated global supplier chain (Tier 1, 2, and 3) could be the ticket to competitive costs and high quality took decades to get right.

One way to throw that book on the fire is to establish an arbitrary and unilateral tariff system that distorts pricing and cost structures from A to Z. So here we are.

Tariff links:

Auto Tariffs: Japan, South Korea, and Germany Exposure 2-25-25

Mini Market Lookback: Tariffs + Geopolitics + Human Nature = Risk 2-22-25

Reciprocal Tariffs: Weird Science 2-14-25

US-EU Trade: The Final Import/Export Mix 2024 2-11-25

Aluminum and Steel Tariffs: The Target is Canada 2-10-25

US-Mexico Trade: Import/Export Mix for 2024 2-10-25

Trade Exposure: US-Canada Import/Export Mix 2024 2-7-25

US Trade with the World: Import and Export Mix 2-6-25

The Trade Picture: Facts to Respect, Topics to Ponder 2-6-25

Tariffs: Questions to Ponder, Part 1 2-2-25

US-Canada: Tariffs Now More than a Negotiating Tactic 1-9-25