Stellantis, the automaker behind Jeep, Chrysler, and Fiat, will move some production to the United States from Mexico to circumvent US tariffs. This decision is a direct reaction to President Trump's trade policies.
The company plans to relocate some pickup truck production to Michigan and is collaborating with parts suppliers to increase the American content in its vehicles, thus reducing tariff liabilities. This will involve shifting parts production to US facilities.
This move negatively affects Canadian parts makers like Magna International, Linamar, and Martinrea, who supply Stellantis. Canadian auto parts are subject to tariffs even when used in Canadian-assembled vehicles but are tariff-free when used in US assembly plants, creating an uneven playing field. Unifor, the union representing auto workers, strongly criticizes this policy, viewing it as a deliberate strategy to harm Canada's auto industry.
The Financial Accountability Office of Ontario predicts a 'modest' recession in the province this year due to US tariffs and Canada's retaliatory measures. Stellantis, along with other automakers, has withdrawn its full-year financial outlook due to the uncertainty surrounding US trade policy.
Stellantis aims to increase the USMCA content in its US-made vehicles to around 85%, to receive tariff rebates. However, rebuilding supply chains and increasing the USMCA content is a time-consuming and expensive undertaking.
Automaker Stellantis NV STLA-N is set to shift some vehicle production and revamp its parts supply lines to avoid paying tariffs in the United States, an early sign of how President Donald Trump’s trade policies will upend the North American industry.
The maker of Jeep, Chrysler, Fiat and other brands plans to move some pickup-truck production to Michigan from Mexico, and is talking with parts suppliers about transferring output to U.S. facilities to boost the American content in its vehicles and dodge the levies, said Doug Ostermann, chief financial officer of the Netherlands-based automaker.
Mr. Ostermann outlined the plan in a conference call with analysts on Wednesday, a day after Mr. Trump triggered another change to his policy to foster U.S. manufacturing by charging 25-per-cent tariffs to companies that import foreign goods, including cars and related parts.
“As the situation evolves, we’ll need to calibrate our North American investments, footprint and employment to ensure the profitability of our company,” Mr. Ostermann said, without providing details.
Several Canadian parts makers supply Stellantis from plants in Ontario, the U.S., Mexico and overseas, including Magna International, Linamar and Martinrea.
Under Mr. Trump’s changes announced on Tuesday, makers of vehicles in the U.S. can apply for tariff rebates based on the share of car content that is compliant with the free-trade deal, the U.S.-Mexico-Canada Agreement (USMCA).
The rebate, in effect for two years, is worth 3.75 per cent of the retail value of the company’s U.S. production in year one, and 2.5 per cent in year two. Mr. Trump also eliminated stacking of tariffs, so U.S. carmakers that are tariffed on parts do not also pay levies on steel or aluminum.
The rebates are gone by year three, and it is not clear if USMCA parts will qualify for rebates. Also worrisome for the Canadian industry is that Canadian automobiles still face U.S. tariffs of 25 per cent.
The auto industry in Canada and the U.S. has opposed the tariffs on imported cars and parts, saying the levies will cause inflation, reduced sales and job losses. Executives and analysts say it costs billions to move plants, and years to rebuild supply chains.
Lana Payne, national president of Unifor, which represents thousands of auto workers, called the new U.S. rules a “convoluted tariff offset scheme designed to shield U.S. plants while continuing to treat Canada as a trade enemy.”
The union, in a statement, noted that Canadian parts installed at Canadian plants are subject to tariffs, but the components are tariff free when shipped to U.S. plants for assembly. The union called this a “crushing blow” to Canada’s highly integrated auto industry.
“Trump’s move to tweak his auto tariff plan is nothing but window dressing – it changes nothing for Canadian workers,” Ms. Payne said. “Canada is not the problem and never has been. This is a deliberate strategy by the U.S. to siphon investment out of Canada and steal our jobs.”
The U.S. tariffs on Canadian autos and metals coupled with Canada’s retaliatory measures will lead to a “modest” recession this year, the Financial Accountability Office of Ontario said on Wednesday.
Jim Farley, chief executive officer of Detroit-based Ford Motor Co. F-N, told reporters at a plant in Kentucky that the tariff changes are a positive step, but more assistance is needed to help and reward automakers for expanding and exporting.
Citing the volatile and ever-changing U.S. trade policy, Stellantis on Wednesday withdrew its full-year financial outlook, joining General Motors GM-N, Volvo VLVLY and Mercedes Benz MBGYY.
Stellantis recently paused Chrysler minivan and Dodge Charger production in Windsor, Ont., and delayed a retooling at its idled assembly plant in Brampton. Mr. Ostermann said Stellantis has also halted importing some vehicles and idled some Mexican assembly lines amid the uncertainty.
The USMCA content in Stellantis’s U.S.-made vehicles is about 80 per cent. If Stellantis can boost this figure to 85 per cent, Mr. Ostermann said, the rebate in the first year will cover the tariffs on the remaining 15 per cent. He cautioned that rebuilding supply lines will not happen overnight.
“We’re very, very active in working on that,” he said. “Some suppliers who may have excess capacity in the United States may be able to switch relatively quickly, and other suppliers [will] take much longer,” Mr. Ostermann said.
“So there’s a whole range there of timelines, but we have some clear strategies that can improve the situation.”
Skip the extension — just come straight here.
We’ve built a fast, permanent tool you can bookmark and use anytime.
Go To Paywall Unblock Tool