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Wednesday, 06 February 2019 19:41

Alabama Auto Plants Brace for Tariffs

Written by Brad Harper, Montgomery Advertiser
Workers assembled vehicles in the weld shop at the Hyundai plant in Montgomery, AL, on Jan. 18. Workers assembled vehicles in the weld shop at the Hyundai plant in Montgomery, AL, on Jan. 18. Jake Crandall, Montgomery Advertiser


Alabama’s automakers just want to know which business plan to use. They’d prefer the plan that keeps sticker prices lower and workers busy. But they may need the other ones.


The U.S. Department of Commerce is investigating whether foreign-made vehicles and auto parts are a threat to national security. A decision is weeks away and could inject steep tariffs into the pricing structure for Alabama assembly plants and their vast network of suppliers. Meanwhile, a revised North American trade deal waits to be ratified by a fiercely divided Congress, and more could change depending on that deal’s fate.


The details are still up in the air as the government struggles to simply stay open.


“We’re looking at all angles,” said Chris Susock, vice president of production operations at Hyundai’s assembly plant in Montgomery, which employs more than 3,000 people. “We don’t know what’s going to happen. I don’t think anybody can predict what’s going to happen at this point. But we have to be prepared.”


One of the few certainties is that tariffs would make car prices jump, and not just for imports.


An analysis by the nonprofit Center for Automotive Research found tariffs and quotas on imported vehicles and parts could cause new car prices to rise by an average of $4,400, an increase that would also hit American-made vehicles. A study by the nonprofit Peterson Institute for International Economics predicted similar price increases.


That’s because every car company uses components that are built in different countries before being installed in finished vehicles at assembly plants in America. Those networks are set up to keep car prices as low as possible.


“There is no 100 percent American-built automobile, and people wouldn’t be able to afford it if there was,” said Kristin Dzizcek, one of the authors of the CAR study.


The Hyundai, Honda, Toyota and Mercedes plants in Alabama---and their suppliers---would all have to find the least expensive way to absorb the tariffs. Some suppliers could move closer to the plant, but that’s also costly and takes a while, and there’s no guarantee how long the tariffs would last. Others may just pay the tariff and pass along the cost to consumers.

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