Automakers, suppliers seeking US policy stability urged to take a long view

White House

President-elect Donald Trump meets with President Joe Biden at the White House in November 2024.

Auto industry executives and analysts have lamented wide swings in federal policies that come every four to eight years, arguing that more moderate changes to emissions standards and electric vehicle rules would be easier for the industry to navigate.

But some are taking a bigger-picture look at the political landscape, accepting that uncertainty is a baked-in feature of the U.S. political system.

By accepting that reality, companies might be better prepared for frequent shifts in policies and regulations, said Kristin Dziczek, a policy adviser with the Federal Reserve Bank of Chicago.

"It's predictable that we're going to swing one way, and then it's predictable that when another party takes control in four years that they're going to swing the other way," Dziczek said at a Dec. 3 Alliance for Automotive Innovation conference. "We want certainty, and we want stable policy. But I think we have to look at the instability as stability."

President-elect Donald Trump's victory in the November 2024 election means the industry is in for a wide array of policy and regulatory changes. Trump is expected to pursue more tariffs on imported goods while curbing federal support for electric vehicle sales and the Environmental Protection Agency's emissions standards and challenging California's ban on new gasoline-powered vehicles.

It's a stark shift in political agendas following President Joe Biden's administration, which made reducing greenhouse gases and boosting EV sales and manufacturing top priorities. But the Biden administration was already a departure from the first Trump administration, which pursued significantly different policies than the Obama White House before it.

It is rare for either major political party to maintain control of the White House for more than eight years in the modern era. Since Democrats won a fifth consecutive presidential election in 1948, neither party has been victorious more than twice in a row except when Republicans won three straight in the 1980s.

"One ray of optimism for me … is that our political shifts are every four to eight years," Dziczek said. "We're not having these shifts that are 12 to 16 years, where you go along one path and then the pendulum swings back. This is more of a metronome. It goes one way then goes exactly the opposite way almost to the same degree."

The instability of U.S. regulations and trade policy, then, is something that automakers and suppliers are increasingly baking into their forecasts and investment plans.

Thinking local

Magna International Inc., North America's largest parts maker and a molder of interior and exterior parts, is doubling down on its "local-for-local" strategy, ensuring that the parts it builds in a market are for customers in the area and that it locally sources components whenever possible. That helps cut down on geopolitical risks from shipping parts overseas, CEO Swamy Kotagiri said.

"Making things local for local has been a good thing for us," Kotagiri told Automotive News, a sister publication of Plastics News. "It doesn't mitigate everything, but it helps."

Other manufacturers are taking a similar approach.

Building local for local is a "very clean formula" for General Motors regardless of which policies are pursued in Washington, said Tanya Skilton, executive director of strategy, innovation and customer care at GM.

"We take a really long view about what we need to do," she said at the MEMA Original Equipment Suppliers Annual Conference. "Geopolitical risk always exists whether it's in A administration or B administration."

To be sure, policy changes during the Trump administration could have a significant impact on the auto industry, even as companies look to buffer themselves from political risk. Tariffs on parts and vehicles imported from Canada and Mexico would add major costs to the supply chain. Automakers are also bracing for reduced U.S. demand for EVs if consumer tax credits under the Inflation Reduction Act are scaled back or repealed.

The Inflation Reduction Act is "quite comprehensive and very useful," said Jeremie Papin, chairperson of Nissan Americas and soon-to-be global chief financial officer. He urged any changes to it to be "seen as the whole."

"If you start to change one side of it, we need to be thinking about all sides of the equation," Papin said at the Alliance conference.

Take a wait-and-see approach to tariffs

As for tariffs, companies should exercise patience by waiting to see what sticks before making decisions about where to invest and source from, said Michael Robinet, S&P Global Mobility's executive director of automotive consulting.

"Anyone who makes a decision on Day 1 of a tariff is probably not doing all their proper strategic planning," Robinet told Automotive News.

Pat D'Eramo, the CEO of fuel system supplier Martinrea International Inc. — based in Vaughan, Ontario — said the company views Trump's tariff threats as a "negotiation tactic more than anything else."

"How long they will last and to what depth is the question," he said at the MEMA conference in November.

As companies sort through what will last and what won't over the next four years and beyond, expect more of them to set their own course and insulate themselves from shifting political winds as much as possible.

"Long term, we're really focused on achieving profitability on our own," GM CFO Paul Jacobson said, referring to the company's EV business.

* Source : https://www.plasticsnews.com/news/automakers-suppliers-seeking-us-policy-stability-urged-take-long-view