Supplier Eye: Investment Certainty Is Critical

Adding trade uncertainty on top of the chaos of the past last five years is not how we encourage sensible, long-term strategies.

June 16, 2025

Michael Robinet

Much has been written about the challenging operating environment within the North American automotive ecosystem. Suppliers and OEMs alike were never trained in business school or past experiences for the erratic trade and legislative environment that they face today.

Since late 2019 and a multi-week strike by the UAW against GM, there has been calamity after calamity impacting our industry. These include the impact of COVID on supply and demand, chip availability, labor shortages, inflation impacts and erratic trade actions that have all suppressed revenue and profits. There is one obvious dynamic impacting the industry: the lack of a stable, expected trade environment is critical to our long-term viability.

Those reading this column are likely well aware of the long-term perspective our industry requires to be viable over the even longer term. Investments are made over multiple cycles (typically measured in 5-year increments), dependent upon the form of capital. Dies and molds for a part/system are typically engineered for the duration of a program, which lasts 5-7 years. Some equipment/automation is structured to carry over to multiple programs over 10 years. Building a vehicle, engine or transmission plant is a multi-decade, multi-cycle bet. The cost of designing, permitting and constructing body and paint shops is not a trivial expense. These major capital investments are virtually impossible to move without significant cost, lost time and upheaval to the organization. One OEM executive once told me that they build plants to be viable for 50 years. The pressures of near-term trade dynamics do not resonate with the constructs of a half-century perspective.

There are other casualties of a short-term perspective to automotive manufacturing investments. Given the potential for a severe shift in the automotive industry’s trade structure for mid-2025, several OEMs have started holding off new investments in both plants and vehicles to ensure precious capital has a stable long-term foundatin upon which to be viable. Though the industry is slowly gaining clarity as to the future environment, we are not there yet. Chances are that bilateral trade relationships with countries outside of North America, as well as whatever succeeds the current USMCA regime, may not be finalized until the end of this year. That would be too many months that the industry has been without a stable trade structure, a period where the industry is battling short-term issues and potentially veering focus away from long-term strategy to stay ahead of a competitive global market.

OEMs and suppliers will only continue to work on programs that are past the point of no return – in other words, the tooling investment has already commenced. The lack of trade certainty (not economic certainty) has emerged in several forms in our industry. Activity on many programs past 2028 has been slowed, or they have had several costly off-ramps integrated to protect the investment (read flexibility). Thus, several programs have been rescoped, delayed or outright cancelled. Additionally, investments at plants are under review – sometimes after tooling has already been installed. This level of capital utilization uncertainty is unhealthy at best.

We anxiously await stability in the automotive planning environment. Given the capital investment over the past decade and the extraneous issues impacting OEMs and suppliers alike since 2019, stability in the planning environment can’t come fast enough.