Auto-parts supplier Linamar wants permanent deferment of U.S. tariffs to avoid shutdown

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Linamar Corp. LNR-T executive chair Linda Hasenfratz says the North American auto industry needs a permanent reprieve from U.S. tariffs to avoid a shutdown, not the 30-day pause announced by U.S. President Donald Trump on Wednesday.

Mr. Trump imposed 25-per-cent tariffs on imports from Canada and Mexico on Tuesday, but granted a temporary exemption to the auto sector the following day.

Ms. Hasenfratz, on a conference call with analysts on Wednesday night, said the tariffs, on top of the coming levies on metal imports, will cost the auto industry billions of dollars, spurring factory shutdowns across North America.

“Our customers, the automakers, are the importers of records for substantially all of our parts, meaning our customers will have to pay the 25-per-cent tariff, not Linamar,” she said. Guelph, Ont.-based Linamar makes car parts, agricultural machinery and industrial equipment.

“The cost of these tariffs if steel and aluminum tariffs are layered on top, would be enormous. The cost for our customers would be in the billions and is ultimately likely to shut the industry down if the waiver doesn’t come through and stay put in place.”

Mr. Trump on Wednesday told executives from the Detroit Three automakers – General Motors Co. GM-N, Ford Motor Co. F-N and Stellantis NV STLA-N – to “start investing, start moving, shift production here to the United States of America, where they will pay no tariff,” CNN reported.

Paul Ashworth, chief North American economist at Capital Economics, said Mr. Trump is giving a 30-day reprieve to time the tariffs with the April 2 levies that will hit carmakers from Europe and Asia.

Linamar employs 26,500 at factories in Canada, the United States, Mexico, Europe and Asia. Ms. Hasenfratz said she will not move factories to the U.S. to avoid the tariffs, citing the massive costs and time it takes to retool parts.

She said Mr. Trump has whip-sawed markets with repeated tariff threats and pauses, underlining that his policies are nothing upon which a company can plan its manufacturing operations.

Linamar, Ms. Hasenfratz said, picks a manufacturing base after weighing work-force talent and availability, energy costs and other factors – not the messages emanating from Washington.

“You must focus on long term,” she said. “You cannot get sucked into the noise.”

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Similarly, she said automakers will not make a call to move plants in the 30-day window based on tariffs that threaten to upend the decades of integrated manufacturing.

“We have developed incredible efficiencies in terms of, ‘We’re gonna make this, you’re gonna make that, we’ll come together to maximize volume, minimize costs, maximize technologies and innovation and really get the best of the supply base,’” she said.

“So trying to dismantle that in 30 days sure can’t happen, you can’t even dismantle it over multiple years.”

Ontario is home to five auto manufacturers – GM, Ford, Stellantis, Honda Motor Co. HNDAF and Toyota Motor Corp. TOYOF – all of which assemble autos mainly for export to the U.S.

Typical of the industry that pioneered just-in-time production and integrated production, each plant is surrounded by a constellation of parts suppliers. At GM’s Oshawa, Ont., pickup truck factory, some suppliers operate within the plant itself, employing 2,000 workers.

The stakes are high for Ontario’s assembly operations, including two plants that are idled for retooling: Ford’s Oakville plant and the Stellantis factory in Brampton. Similarly, GM’s Oshawa plant makes Silverado pickup trucks, which are also made in the U.S. and Mexico.

David Adams, head of the Global Automakers of Canada, which represents Honda, Toyota and several other brands, said the U.S. actions undermine the free-trade deal Mr. Trump renegotiated with Canada and Mexico in his first term.

“In a way, it’s like trying to nail Jell-O to the wall because we don’t really know what we are dealing with because the pretext for tariffs at one moment changes to the next,” Mr. Adams said.

“We don’t have a clear idea what the bar is. The reality is these tariffs are fundamentally taxes and they are going to impact consumers especially but workers on both sides of the border. They need to be removed.”

The tariffs would also drive up car prices for U.S. consumers and hit automakers’ profitability.

“Such tariffs would slash billions from automakers’ profits, triggering ripple effects across the broader supply chain due to potential production disruption and driving up costs for the end consumer,” David Binns and Nishit Madlani, Standard & Poors’ credit analysts, said in a research note.