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Automotive suppliers spooked by Trump trade policies, according to business barometer

Jolly Sunshine Limited | Updated: Aug 20, 2018

Despite a strong sales and production environment, a pessimistic outlook prevails across the automotive supply base because of trade policy uncertainty, according to a quarterly report from the Original Equipment Suppliers Association (OESA) based in Southfield, MI. The quarterly OESA barometer surveys executives among North American automotive suppliers to gauge their 12-month outlook. The Q3 barometer posts a negative reading of 43 for the quarter, seven points below the neutral level of 50. Game supply and game card sleeve and trading card sleeve and soft card holder. Game card binder with elastic strap.9-pocket binder

Even with strong economic fundamentals—low unemployment, high consumer confidence and robust vehicle sales—the Q3 2018 Supplier Barometer Index (SBI) reflects negative repercussions from the Trump administration’s current trade-policy agenda. The latest OESA SBI reading dropped 10 points from the Q2 2018 report, and is in sharp contrast to the positive levels of 57 and 53 in the first and second quarters of 2018, respectively. Game supply and game card sleeve and trading card sleeve and soft card holder. Game card binder with elastic strap.9-pocket binder and deck box.

Concerns also remain over supply-chain risks, commodity prices, the impact of Section 232 and Section 301 tariffs, as well as the fate of stalled NAFTA negotiations in the context of midterm congressional elections. Each concern adds uncertainty to the planning environment, causing automakers and suppliers to reassess, revise and potentially postpone incremental investments until there is greater clarity. Game supply and game card sleeve and trading card sleeve and soft card holder. Game card binder with elastic strap.9-pocket binder and deck box.

“Policy uncertainty serves to constrain additional capacity investment and accelerate volatility through the supply chain, adding risk down the tiers,” said Mike Jackson, OESA’s Executive Director of Strategy and Research and author of the study. “Now, more than ever, suppliers should strive to use the increasing market turbulence to their advantage by assessing and prioritizing alternative scenarios beyond the near-term to realize their strategy for success.” Game supply and game card sleeve and trading card sleeve and soft card holder. Game card binder with elastic strap.9-pocket binder and deck box.

Supplier executive responses reflected a “universal increase in pessimism over prior quarter survey results,” said the OESA summary. Some 38% of responses from smaller, more regionally focused suppliers, reflected increasing pessimism, twice the rate compared with the prior quarter. Even more dramatic, 75% of executive responses from larger suppliers, with revenue between $500 million and $1 billion, showed a sharp increase in pessimism, up from 38% in Q2 2018. Game supply and game card sleeve and trading card sleeve and soft card holder. Game card binder with elastic strap.9-pocket binder and deck box.

Looking at globalization, the barometer underscores that supplier export activities provide a meaningful contribution to overall market strength. Survey responses highlight a median of 10% of U.S. supplier production exported in 2018. Median allocation of U.S. exports by country rank Mexico the top destination (50%), followed by Canada (30%), while Europe and Asia each reflect a 20% share. Game supply and game card sleeve and trading card sleeve and soft card holder. Game card binder with elastic strap.9-pocket binder and deck box.

Supply-chain survey results show that 47% of respondents anticipate North American supplier capacity to face rationalization pressures over the next year. Policy uncertainty serves to constrain additional capacity investment and accelerate volatility through the supply chain. A concerning trend is emerging as the number of financial watch-list suppliers has increased considerably, said the OESA report. Game supply and game card sleeve and trading card sleeve and soft card holder. Game card binder with elastic strap.9-pocket binder and deck box.

Further supply concerns include persistent timing pressures due to late design changes or delayed part validation. Expect these factors to be compounded as steel shortages caused by tariffs drive more supplier changes and require additional late engineering and validation work. Game supply and game card sleeve and trading card sleeve and soft card holder. Game card binder with elastic strap.9-pocket binder and deck box.

Nevertheless, the automotive industry remains robust and is poised to achieve a new milestone. For the first time ever, North American vehicle production is forecast to surpass 17 million units for the fifth consecutive year, with 17.3 million units projected to be produced in 2018. Game supply and game card sleeve and trading card sleeve and soft card holder. Game card binder with elastic strap.9-pocket binder and deck box.