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Magna faces challenges from Trump's 25% tariffs on foreign

auto

imports

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Flexibility crucial for Magna amid tariffs, says CEO Swamy

Kotagiri

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Smaller suppliers under pressure, says Laurie Harbour of

Wipfli

By Nora Eckert

ST. CLAIR, Michigan, April 2 (Reuters) - Walking through

a Michigan plant past whirring robotic arms and flying sparks,

Swamy Kotagiri, the CEO of Canada-based auto supplier Magna

reflected on how he is trying to "control the

uncontrollable" in the midst of industry-shaking tariffs.

"We've had a series of black-swan events," Kotagiri said.

"Our industry really prospers with certainty and cadence and

stability. And that's what's been missing in the last four

years."

The vastness of Magna's facility in Michigan underscores its

role as a key cog in the intricate global auto supply chain. The

company has 59 facilities in the United States, 50 in Canada,

and another 33 in Mexico, part of the legacy of the 1990s North

American Free Trade Agreement that produced a highly intertwined

system of sending parts from one country - and then back again -

to produce cars in some of the world's largest markets.

But Kotagiri and other leaders of auto companies are now

facing an upended industry. President Donald Trump's 25% tariffs

on foreign auto imports announced at the end of March are

expected to raise consumer prices, reduce demand and hit job

growth. Magna, with more than 170,000 employees across 28

countries, dwarfs most of its large customers, including the

likes of Ford, General Motors and Toyota.

Speaking just hours before Trump called for the 25% tariffs,

Kotagiri said there was no "easy way to absorb this," saying

much of the cost would be passed on to consumers. Trump's levies

are expected to add thousands of dollars in cost per vehicle and

billions for automakers and suppliers, analysts say.

'FLEXIBILITY IS KEY'

Magna has already weathered union strikes, a semiconductor

shortage and lower-than-expected EV demand. In the face of

tariffs, Kotagiri said Magna is trying to be as flexible as

possible, including at its EV structures facility in St. Clair,

Michigan, where it cranks out battery enclosures for vehicles

like GM's Hummer and Silverado EV. If needed, the supplier can

reprogram those swinging robotic arms to assemble frames or

engine cradles, Kotagiri said.

"The world changed," Kotagiri said. "Flexibility is key. We

need to have the footprint, the capacity and the expertise to

help."

But its success may also depend on smaller suppliers, who

are likely even more distressed.

"If you talk to small and mid-sized suppliers that support,

like a Magna, I mean, talk about panic," said Laurie Harbour,

whose team focuses on automotive suppliers at advisory firm

Wipfli. "Their cost has gone up so much and the revenues are

still so soft," she said, adding that it is "putting pressure on

their viability as a business."

Massive companies like Magna also have to trace where their

products land and how many times they cross borders. Some

suppliers surprisingly don't have complete visibility into this,

Harbour said.

There may be more demand for Magna's U.S. business as

automakers expand production stateside to avoid tariffs. Last

month, Hyundai announced a $21 billion investment in the United

States, and supplier Lear said it could expand as well. On the

other hand, S&P Global Mobility estimates that the rising cost

of autos could sap U.S. sales, cutting annual vehicle deliveries

by more than 1 million from its current 16 million.

For new growth, Magna is looking in the same direction as

many others - China, the world's largest car market. Magna's

China business accounted for 13% of the company's overall

revenue, where it has 69 manufacturing facilities that employ

more than 30,000 people

When Chinese businesses "start thinking of either exports or

coming to Europe or other parts of the world, we believe we have

the seat at the table," Kotagiri said.