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August 06, 2019 04:13 PM

Magna tackles tariffs as it transforms

Michael Martinez
Automotive News
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    Tobin

    TRAVERSE CITY, Mich. — As Magna International prepares its business for tomorrow, it's been forced to reckon with challenges that threaten the bottom line today.

    This year, it scrambled to move wire harness production from China to Thailand after the Trump administration slapped 25 percent tariffs on Chinese goods. And company officials say they've been forced to consider moving production of other components.

    A spokesman said Magna estimates tariffs on Chinese goods could cost it $34 million this year.

    "It's had a definite impact," Chief Marketing Officer Jim Tobin told Automotive News ahead of his Thursday presentation here. "It's in our discussions with our customers and we're taking localization into consideration."

    Tobin said much of the uncertainty around trade could be resolved with the passage of the United States-Mexico-Canada Agreement, which he's hopeful could be in place by the start of next year. Magna has been in close communication with the Office of the U.S. Trade Representative over aspects of the deal including regional value content figures.

    "We're hoping it will come through to a fair conclusion," Tobin said.

    But even when Magna gets relief on trade and tariffs, the company faces the uncertainties of industry electrification and automation.

    "You have to make sure at the end of the day you're meeting expectations of investors," Tobin said. "How do you make sure we have balance on the returns of today as we're investing in tomorrow — and that tomorrow, in some cases, we don't have a good feel for when it's going to materialize."

    Tobin said Magna is committing significant investment into lightweighting, advanced driver safety systems and other r&d areas in autonomous and electric vehicles. He said Magna intends to spend $100 million more on r&d this year than it had planned, with much of it going into developing new technologies.

    The company is also aggressively targeting partnerships and alliances to help control costs. In China, Magna has entered a joint venture with BAIC to build EVs there. It will be producing vehicles in a plant outside Shanghai in 2020, Tobin said.

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