Brose expects $5 million in costs this year from Trump's tariffs

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An example of Brose’s adjustable power console. Photo credit: Daniel Löb

DETROIT — Brose Group CEO Kurt Sauernheimer and Brose North America President Frank Lubischer said they must be “flexible” when it comes to tariffs, which could cost the supplier $ 5 million this year.

The executives also discussed with reporters strategies behind the company’s investment in products for electric and autonomous vehicles as well as their lightweight technology production and emissions reduction.

Tariffs

U.S. President Donald Trump recently slapped tariffs on steel and aluminum and has threatened more measures affecting trade.

“That’s a situation we have to deal with,” said Sauernheimer, who was appointed CEO in January. “We have to be flexible.”

Sauernheimer, 58, joined Brose in 1987 as a sales engineer and led the corporate group’s purchasing activities before heading the door business division as executive vice president since 1999. He said tariffs are not “black and white” and could have implications for much of Brose North America’s supply chain.

Lubischer, 55, who previously was senior vice president, chief technology officer and chief strategy officer at Nexteer Automotive, expects an overall cost of $ 5 million this year because of the tariffs, and an overall cost pressure of up to $ 50 million. This does not take into account the potential 25 percent tariff on automotive imports also threatened by Trump.

Lubischer said this may result in further Brose expansion in the U.S. earlier than expected.

“Usually tariffs lead to cost increases no matter if you import or if it’s in the local market,” said Lubischer, who was appointed president in March. “We experienced that with the steel immediately.”

Of Brose North America’s 11 plants in the NAFTA region, six are in the U.S., but the two executives said the biggest impact from tariffs could be on their electronics operations.

“The whole industry is getting a lot of electronic parts out of China,” Sauernheimer said. “The standard electronic things are mainly built in China nowadays, so that will be affected.”

Comfort and efficiency

The mechatronic components and systems supplier also demonstrated its power side door system Wednesday, which combines multiple components to support automatic open and close and flexible packaging for automakers. The door recognizes its driver by the phone or key when the driver approaches the vehicle.

The system can be installed without major changes to the automaker’s door or sheet metal and can accommodate autonomous driving and car-sharing. It can also be sold as an addition to the vehicle.

The supplier also introduced the material used for its door system, which uses glass fibers rather than conventional steel or aluminum.

“If you reduce weight, you reduce emissions,” Sauernheimer said. “It’s not only a weight reduction, it’s also a cost reduction, of course.”

The material saves more than 13 pounds per vehicle and is less expensive than carbon fiber. The material will be in global production in a month.

The supplier expects to see its flexible seating applications — which include manual and power front seat structures for working and interacting in a vehicle, particularly autonomous vehicles — in the German luxury vehicle market within two years, and its first adjustable power console enabled for North American customers by 2020.

Investments

The supplier has committed to investing $ 800 million in creating jobs and products in North America, with $ 550 million to be invested in Michigan.

Brose North America ranks No. 47 on Automotive News’ list of the top 100 suppliers to North America automakers, with parts sales to automakers nationwide of $ 1.701 billion in 2017.

Parent company Brose Fahrzeugteile GmbH & Co. of Coburg, Germany, ranks No. 37 on Automotive News’ list of the top 100 global parts suppliers, with parts sales to automakers worldwide of $ 7.09 billion in 2017.

Brose North America’s largest customers are General Motors, Ford Motor Co., and Fiat Chrysler Automobiles, executives say.

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