Neither Ford Motor Co. nor General Motors Co. have yet issued a policy regarding supplier tariff costs, several supplier executives told Crain’s Detroit Business. Ford instructed suppliers last month to "continue shipping parts in accordance with existing contractual terms, including pricing and delivery schedules."
The 25 percent tariff on auto parts, which applies to everything from components in engines and transmissions to electronics, seats and windshields, are set to go into effect May 3. However, USMCA-compliant parts will be exempt until the Department of Commerce implements a system to vet U.S. content, the administration has said. No timeline has been given for that.
Many parts makers are also being hit by universal 25 percent steel and aluminum tariffs that went into effect March 12. Those bills will soon be coming due as suppliers cycle through any remaining inventory they had before the duties were implemented.
Stellantis, like Ford and GM, has been surveying suppliers to better understand the exposure of tariffs among the tens of thousands of parts that make up their vehicles.
Tariff relief payments from Stellantis come with some strings attached. Suppliers must detail their tariff mitigation strategy, enter a cost savings plan and have their requests validated by a third party, the people familiar with the plan said.
They said the automaker is stopping short of issuing revised purchase orders, which would bake the tariff payments into a legal contract.
Stellantis declined to comment. Crain's also inquired with GM and Ford.
It is unclear how Stellantis will handle the additional costs to its business. The company announced last week it would temporarily lay off nearly 1,000 workers in the U.S. due to the tariffs. It also said it would extend employee discount pricing to the general public.
A few months ago, the European automaker, whose North America headquarters is in Auburn Hills, may have seemed the least likely to share a cost burden with suppliers. Its relationship with parts makers has been notoriously strained and centered on cost savings, though its post-Carlos Tavares promise of rolling back its hardline policy has many supplier executives feeling hopeful.
The tariff relief plan could indicate the company’s intention to make good on that promise. It also could be inspired by a hard-learned truth: Its procurement contracts don’t protect it from disgruntled suppliers shutting down their production.
Stellantis learned this over the past year and a half after filing lawsuits against several of its suppliers over pricing disputes. The automaker was dealt a blow last month when a federal judge dismissed its lawsuit against a supplier it accused of holding parts “hostage” to get price increases and shutting down production of Ram, Chrysler, Dodge and Jeep vehicles.
To be sure, the law of the land when it comes to OEM-supplier contracts is still unclear, due largely to a series of conflicting judgments in Michigan at the state and federal level. More clarity isn’t expected for at least a year as key cases work their way through the court systems.
On the issue of tariff costs, the bigger point is that most suppliers cannot afford to absorb a 25% price increase, even if they are contractually responsible, said Daniel Rustmann, co-chair of the automotive law practice at law firm Butzel.
“The first reaction of almost all of the OEMs is tariffs are your responsibility,” Rustmann said. “This time, because they are so big, the suppliers are almost uniformly pushing back.”
Taking a hard line with parts makers could end up putting them in bankruptcy, which would create a far bigger headache for an automaker than just pulling out their wallet to keep production moving. At the same time, no supplier wants to be the one to shut down a customer, Rustmann added.
“Right now, everyone is still a little bit stunned,” he said. “Nobody wants to be the first one to shut down an assembly line.”
