Swamy Kotagiri led Magna International as CEO during the robotic precision operations in Michigan's expansive manufacturing plant. Magna International based in Canada prepares for enormous changes as President Donald Trump plans to impose 25 percent tariffs on imported automobiles.  

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Kotagiri described numerous unanticipated events that occurred. The automotive sector maintains stability through surety in its growth path. Available stability has remained absent during the previous four years.  

Magna operates 142 facilities between the United States and Canada and Mexico which stemmed from the implementation of the North American Free Trade Agreement. The NAFTA-produced tightly linked supply chain system made it possible for manufacturers to have parts traverse across borders up to multiple times during finished vehicle assembly processes. This new policy of increased tariffs endangers the current supply chain system by driving up consumer costs and decreasing market demand while jeopardizing employment positions.  

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Announced tariffs from Trump during March 2018 will increase car prices by thousands and impact automotive and supply companies collectively with billions of dollars. To him there is no straightforward solution for handling this situation because much of the costs will become consumer expenses.  

Flexibility is Key

Magna has previously survived through union work stoppages together with semiconductor supply disruptions and lowered electric vehicle market performance. The EV structures facility in St. Clair, Michigan under Magna operates production changes to build battery enclosures for vehicles including General Motors’ Hummer and Silverado EV. The company has the capability to reconfigure robotic assembly lines through programming adjustments for additional component manufacture according to Kotagiri.  

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"The world changed," he said. "Flexibility is key. Magna requires space together with manufacturing ability along with specialized knowledge to transform.  

Smaller suppliers endure additional pronounced pressure in these circumstances. The analysis from Laurie Harbour at Wipfli indicates that increased expenses together with declining revenues threaten small suppliers' ability to survive.  

While some automakers are expanding U.S. operations to avoid tariffs—Hyundai recently announced a 21 billion dollar U.S. investment—analysts predict tariffs could reduce U.S. auto sales by over one million vehicles annually.  

For future growth, Magna is looking to China, where it has 69 plants and 30,000 employees. China accounts for 13 percent of Magna’s revenue, and the company sees potential in supplying Chinese automakers as they expand globally.  

"When Chinese businesses think about exports or expansion, we believe we have a seat at the table," Kotagiri said.